Top of the league

The heavy falls seen on stockmarkets around the world in recent weeks would be enough to raise jitters among the bravest of investors. Initially knocked by falls in China, financial markets descended even further on worries about the health of the American economy.

Investment funds can be heroes or zeros – investors would most likely have doubled their money in China’s stockmarket last year. But whether your investment funds are going up or down, you want to know. You may need to take action, or you might decide to sit tight. Remember you don’t lose money until you actually decide to sell.

Either way, if you want to know how to keep on top of your investment funds’ performance – and understand the charges made on your assets – can show you how.

What are investment funds?

UK investors generally have a choice of three types of investment funds: unit trusts, investment trusts, and open-ended investment companies or Oeics. But they all play a similar role in that they pool money from a number of people and then invest in a broad range of investments in order to spread the risks – avoid the problem of "putting all your eggs in one basket".

Unit trusts have traditionally been the most popular type of investment fund. They are ‘open-ended’, in that units can be created or dissolved as investors come into, or leave, the fund.

Investment trusts are actually companies that just invest in the shares of other companies. They are closed-ended in that there are only so many shares in the trust and these are traded on the stockmarket.

An Oeic is a kind of hybrid between unit and investment trusts – they are open-ended but are also companies.

What are the charges?

Unit trusts usually have an initial charge of five to six per cent. This pays for any commission due to a broker and the administration fees of setting up the investment. There is an annual management charge, usually around 1.5%, about a third of which goes to the broker and the rest to the fund manager. Unit trusts can also have a ‘bid-offer spread’. Investors must buy units at the offer price and sell them at the lower, ‘bid’ price when they divest. The difference can be as high as 5-6%, which is effectively another charge.

But you can get a discount on the initial charge by buying your funds through, which charges zero initial commission. Click through on the Investment button on to find out more.

Oeics, and now many unit trusts, also have ‘single’ prices, based on the mid-point between the bid and offer prices. However, this can be misleading because a charge called a dilution levy may still be made when an investor invests and divests.

Investment trusts might be less popular than unit trusts, but their charges do tend to be lower. There will be an initial charge if you invest by applying to the investment company. You can avoid this by buying investment trust shares directly through a stockbroker, although you will pay dealing charges and stamp duty. There is also an annual management fee on investment trusts, but this tends to be around 0.5%, somewhat lower than that payable on unit trusts and Oeics.

However, these are not the only charges made on funds. Annual fees and expenses are also charged to the fund every year. For an explanation, see the website, the only company to analyse the ‘Total Expense Ratio’. These are included in the Lipper Leader fund ratings. To see how your fund rates, see the website

Choosing a fund

An increasing number of investors have a good idea which funds they want to invest in. A tremendous amount of information is available on the internet. Rating agencies such as Morningstar and Standard & Poor’s are also sources of information.

But if you are unsure about where to invest, either seek help from an independent financial adviser or take a look at a panel of best performing funds by clicking through the Investment button on There are 1,000 funds to choose from, as well as the option to speak to an adviser.

Keeping track

So now you have chosen your investments, how do you keep track of them?

Valuations of portfolios are just about the most common request financial advisers receive from their clients. For some investors, looking at the listings in the Financial Times and other newspapers is one choice.
However, this is the Internet age. For those investors happy with technology they can get up to date information and the value of portfolios calculated for them.

You may like to ask your financial adviser about a "wrap" facility. Many financial advisers are now able to set these up for their clients and by keying in the number of units or shares held in funds, clients can see the value of their portfolios anytime online.

If you bought your funds using one of the "fund platforms" now available on the internet, you will also likely have access to such wrap facilities, too.

Or you can let help you. By clicking through the Investment button on the website, you can gain access to an Account Management facility, which keeps track of your investment funds for you, as well as letting you know how your funds’ performances compare with other funds in the same investment sectors.

You can switch your existing funds into this facility, or you can buy funds through the website.

Keep your nerve

The rollercoaster path sometimes taken by financial markets can fray investors’ nerves. But always remember that in the long run, they tend to give very good returns. If the market dips, by cashing out you can crystalise your losses. So try to stay calm, diversify your investments and stay invested for the long run. That way, you have more chance of doing well.

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