A simple guide to funds

What is a fund?

A fund is a ‘pooled’ investment, which means it brings together the savings of many people like you.

The fund is managed professionally by a fund manager and aims to achieve the objective as outlined in the fund's factsheet.

The idea of a fund is that you get to spread your monies across a wider set of individual investments.

How funds work

Your payments are invested in your chosen funds by buying units in these funds:

  • Each fund is divided into units of equal value 
  • These units are used to calculate how much your investment plan is worth 
  • The value of the units may rise and fall depending on the fund’s investment performance, but you may not get back what you invested. 

What is an asset class?

The investments that a fund owns are often referred to as assets.

There are a different classes of assets. Asset classes include:

  • Equities which are individual company shares.
  • Bonds which include loans to governments and companies 
  • Commercial property which includes offices and commercial buildings or   property shares 
  • Money markets, including deposits and money market instruments.

Each fund invests in one or more asset classes to help achieve the fund's objectives, as outlined in the fund factsheet.

All funds carry some risk and you should consider these before making any investment decision. These investment decisions should be made for the medium to long term - at least five to ten years or more and you may not get back what you invested.

Managed funds

A managed fund is an investment in a range of asset classes which means your investment is spread across a wider range of both asset classes and individual investment holdings.

The fund manager will also be able to change the proportion of the fund invested in different asset classes, taking advantage of more investment opportunities to help achieve the investment objective of the fund.

This wider spread of investments means that your investment risks are reduced, in part, and your fund value may experience less volatile investment returns over time, than if you invest in any single asset class.

Further help?

If you want to understand how to use different investments and funds to meet your goals, it's best to speak to a financial adviser.