Investment Funds

What are collective investment funds (CIF)?

Collective investment funds are offered by many financial institutions as a means of pooling individuals resources by way of investment into areas that are not normally available to them. By that I mean, for instance, that you could invest in Australia, Japan, South America, whereas normally you would only be investing in the UK market.

Why should I invest in a collective investment fund?

A collective investment fund should be considered in a portfolio because it offers access to global markets, and because of the pooling system, reduces your overall costs.

What are unit trusts?

A unit trust is where an individual buys units in a fund. The money is pooled. The pooled money is then invested in a variety of areas. There are many unit trusts that specialize in property, stock and shares, overseas funds. You can decide which unit trust to invest in, the unit trust managers then carry out the investment for you. It is an area you should seek advice because of the risks on the individual funds.

What is an open ended investment company (OEIC)?

An open-ended investment company is a company that has more than one area for you to invest in. Each fund within the OEIC, as it is called, has individual share purchases and individual shareholders, within each fund investors' money is pooled to purchase a range of investments, stocks and shares, property and other things.

What is the difference between an OEIC and a unit trust?

An OEIC allows individuals to buy shares in it, whereas a unit trust is where an individual buys units. An OEIC is single priced, which basically means there is a fixed price for it. Whereas a unit trust, the units has a buying and selling price.

What is an investment trust?

An investment trust can invest in wide range investments as do other similar products. But the investment trust has a fixed capital base. In other words, the number of shares that are issued are restricted in the market place.

What are the advantages of a unit trust?

The advantages of a unit trust are the spreading of risk over a wide area. There are a number of unit trust managers that offer a variety of funds. Before you invest, I would advise you to contact a financial advisor.

What are the advantages of an investment trust?

The advantages of an investment trust is that the investment trust itself can raise money, take out loans, thereby increasing the earning of the capital of which you put in. To give you an example, if you have an investment trust that has a capital base of a million, and buy shares on the value of a million and get a 10% return, that would make profit of one hundred thousand. If the investment trust took out a loan for half a million pounds, then if you have a same return, the return would not be ten percent, but fifteen percent. Obviously, in good times, the Gearing effect increases the profits you make. And adversely, in bad times, your losses would be greater.

What types of investments do CIFs invest in?

Collective Investment Funds invest in a wide range of stocks and shares, guilt's and bonds that are quoted on the major stock markets.

Can I choose what areas I want to invest in when using a CIF?

You cannot choose which area to invest in when using a Collective Investment Fund. This is done by the managers of that particular fund. But, there are individual investment funds available, and you should seek advice from your professional advisor before proceeding.

Is my money tied in when investing in a CIF?

No, your money is not tied in investing in Collective Investment Fund. All charge is upfront and what we mean by that is when you purchase them all charge is paid by you. You should use this investment for medium to long term basis, because you have paid for all charges upfront.

Are CIFs high risk?

Collective Investment Funds can be high risk, depending on the area that you've invested in. Before investing, it is strongly advised that you contact your financial advisor.

What costs are involved in collective investment funds?

There are basically two costs investing in collective investment funds. Firstly, initial charges between 3 and 5 percent. Secondly there is annual charge, management charges between one and half and three percent. This is taken on an annual basis and detected from your funds.