A GUIDE TO INVESTING: HOW TO HOLD INVESTMENTS PART 3.5

In this series of blog posts we will be breaking down both the basics and the complexities of investments. 

 

 

 Now time for….

 

How to hold investments (Part 2)

WHAT ARE THE OBJECTIVES OF FUNDS?

 

The objectives of funds can vary considerably. Here are thee examples of objectives:

 

1.     Asset mix

2.     Geographic region

3.     Business area

 

FUND SHARE CLASSES

 

You can often buy different share classes of a fund to give you returns in different ways

 

1.     Income share class

 

If you want an income from an investment fund you would choose an income share class. 

 

An income share class uses any investment income generated by the assets in the fund generated to produce a periodic cash payment. This cash can be transferred into an ISA or Investment Account; or can be reinvested to buy more shares or units, or can be paid into a normal bank account as an income withdrawal.

 

2.     Growth share class

 

If you want financial growth from an investment you can choose a growth share class.

 

A growth share class is designed to add any investment income generated by the assets back into the fund to increase the share or unit price.

 

 

WHAT IS THE DIFFERENCE BETWEEN A UNIT TRUST AND AN OPEN ENDED INVESTMENT COMPANY (OEIC)

 

 

A unit trust is a collective investment fund that can buy bond, properties or shares in companies. There are two units within the fund that investors buy. A fund manager is in charge of creating new units according to new investor and cancelling units for those selling out of the fund. Each unit’s price varies depending on the value of the funds underlying investments divided by the number of units in circulation.

 

An open ended investment company (OEIC) is a collective investment fund that can invest in shares, bonds and other permitted assets appropriate to the investment objective.

 

An OEIC has the legal status of a company and is split into shares that the investors buy.  A fund manager creates and cancels shares according sales. The shares price varies depending on the value of the funds underlying investments divided by the number of shares in circulation.

 

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alistair bambridgeComment