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Guide to Fund Management
- The best way to manage a fund is to buy at a low price and sell at a high price which is usually easier said than done.
- Money in funds is referred to as units, which is a common denominator within funds, therefore one referes to unit value. The more units one has and the higher the unit value the more ones money is worth.
- All funds are managed by fund managers. They invest in specific areas as described by the fund sector and name. For example a property fund usually invests in uk property with a typical mix of office, retail, industrial and cash holdings.
- All funds have an element of risk attached to them which varies according to the nature of the fund and some are more volatile than others. These indicators are highlighted during fund research. Therefore the lower the fund risk and volatioity the lower the potential return and similary the higher the risk the higher the potential return. It should be remembered that the value of funds can fall as well as rise to the higher the higher the risk the higher and quicker the potential fall or increase of the fund value.
- Just because a fund has had good growth over a 6 month, 1 year period and beyond doesn’t mean that’s the fund trend in the short term, i.e. whats going on now is it increasing or decreasing, therefore one needs to look at what is happening to the fund now also.
- Funds are also ranked on quartile growth and those ranked as top quartile cold be regarded as a better bet.
What you therefore need to consider when thinking of fund selection or fund switching
- What is my attitude to risk? Am I adventurous and am I willing to risk it all in a high risk fund for the potential return. Am I very cautious. Do I want to invest but have a lower risk of fund, which will give a different rate of potential return than if I were adventurous. Am I somewhere in between. Mainly cautious but not overly adventurous.
- What am I investing for? Fund growth then income later, Tax efficiency. What am I saving for? Retirement, Lump Sum later. Income from investment.
- What is the best way to save or invest. Building Society, National Savings, ISA, Investment Bond, Pension.
- Do I want to invest via a single premium payment i.e. a lump sum or a regular premium, or a combination of both. If so what is the best product or products for me to choose.
- Do I need instant access or not. How much of a rainy day fund do I need to keep back.
- Investment should be for a minimum of 5 years and longer.
- Product Selection
