Want to start investing in the markets? Looking for some help with managing your investments? Then funds, or collective investments, are worth considering for your portfolio.
Funds explained
A fund is a type of pooled investment used by a fund manager to deal in a variety of shares and other assets. The vast range of funds available lets you invest in things that suit your objectives, such as:
- A particular geographic market
- A range of industry sectors
- A specialist asset class, such as bonds
One of the major advantages of funds is they allow you to build a diversified portfolio cost-effectively. By investing even a few hundred pounds in a fund, you can get exposure to far more companies and indices than you could by putting money directly in the market yourself.
How do funds work?
There are two main types of funds – active and passive.
Active funds
Active funds are run by a professional fund manager who selects what goes into the portfolio. The aim is to beat their benchmark index and outperform the market to give you premium returns.
Passive funds
Passive funds (or tracker funds) aim to mirror – or track – the performance of a key benchmark or index, such as the FTSE 100.
Find out more about the differences between active and passive funds.
How are funds priced?
Funds are usually priced once per day. This happens at a time set by the fund manager and is decided by the individual prices of the underlying assets.
What are the benefits of investing in funds?
There are many advantages to investing in funds, such as:
- Portfolio diversification: When you buy a fund, you get access to the range of investments it holds. As many funds invest across the globe, this means you get exposure to markets and companies that are not normally easy to deal in directly.
- Expert fund management: If you choose an active fund, the fund manager will aim to beat their benchmark – if you pick a good one, you may do better than the overall stock market.
- Choice: You can choose from over 2,000 funds with us, many of which offer access to specific asset classes, markets or geographical locations.
- Easy to manage: Your fund manager will make the investment decisions for active funds, so you don’t have to follow the markets, while passive funds track the fund benchmark or index.
- Flexible: You can hold your funds in many different accounts, including tax-efficient Stocks and shares ISAs or SIPPs.
The different types of units or shares
When buying funds, you will often see the acronyms ‘Inc’ or ‘Acc’ after the name of the fund. These indicate the different classes of funds. Knowing these, you can choose the type of units that suit your investment strategy and time horizon.
- An 'income' class class pays out dividends directly into your Dealing account, ISA or SIPP.
- An 'accumulation' class, rolls up dividends and other forms of income and puts them back into the fund, with the effect of increasing the value of each unit or share held.
If you need a hand choosing your investments, you can get a few suggestions from our specialists – or even let them do the hard work for you. Just have a look at our easy investment ideas.
How to buy funds online
It’s easy to invest in funds online. You first need to open an AJ Bell account. Then, browse and choose the fund that matches your investment goals. There are over 2,000 funds to choose from – to make it easier for you, we've created the AJ Bell Favourite funds list which is our pick of the top funds in the market for various criteria.
There's a low-cost £1.50 dealing charge for buying and selling funds, and an account charge for holding the fund with us. In addition, you'll pay the fund manager's charge for your chosen investment. These charges are included in the fund price and can be found on the fund factsheet.
To view our costs for dealing and holding funds, please visit our charges and rates page.
Follow these steps to learn how to buy and sell funds on the AJ Bell website.
Can I invest in funds regularly?
You can invest as little as £25 per month into a wide range of funds with our regular investment service. Simply set up the instruction online and we'll invest each month for you into the fund of your choice. This is a great way to save regularly and build up your portfolio.
Why invest in funds with AJ Bell?
Low-cost dealing charge of just £1.50 for buying and selling
Deal online and on the go with our free mobile app
Regular investment service allows you to save from as little as £25 per month
FREE access to our monthly Shares magazine
Wide range of funds available – over 2,000
Dividend reinvestment available across a range of shares, investment trusts and ETFs
Get your money working for you
Our investment accounts
Ready to put your money to work? Then you’ve come to the right place.
Investment options
See the full range of investments that we offer, from stocks and bonds to AJ Bell managed funds.
Regular investing
Get into the investment habit by putting in as little as £25 per month, with discounted dealing charges of just £1.50.
Disclaimer: The value of your investments can go down as well as up and you may get back less than you originally invested. The AJ Bell funds and Favourite funds list aren't a personal recommendation. We don't give investment advice, so you should talk to a (suitably qualified) financial adviser if you're not sure where to invest.