OEICs (Open Ended Investment Companies) are companies and unit trusts are trusts which allow you to invest in a range of their funds. These funds are just a way for investors to pool their money together, to take advantage of buying in bulk, spreading the money across lots of different investments and gaining access to investment expertise which would normally be too expensive to obtain on your own.

When you buy into these funds through an OEIC, you buy shares and when you buy through a unit trust you buy units. But don’t worry about this terminology; it’s the funds that are important.

Picking the right fund for you is a case of understanding a little more about what the fund investment objective has been set up to achieve, its performance and how risky it is. If you are unsure at all it is always worth seeking help from a financial adviser.

Pros

• You can invest a lump sum or make regular contributions.
• As money is pooled together you get access to a wider range of investments than you could afford to buy direct.
• All schemes are regulated by the FSA, the industry watchdog.
• You can receive regular income (e.g. monthly or quarterly), depending on your choice of investment.
• They give you the potential for capital growth or income or both.
• It’s professionally managed so you don’t have to make hard investment decisions – that’s all done for you by an expert.

Cons

• There’s a risk, as with all investments especially those linked to the stock market that your investment value can go down as well as up, and you may not always get back what you put in.
• Charges will be taken from your investment to pay for the management.

There are lots of different funds available, so if you’re interested in investing in this way there’s bound to be one that suits you. You don’t need a large lump sum to get started and can usually get set up with as little as £500 and you can add to it monthly in instalments from around £25 to £50. However there’s a risk, as with all investments - especially those linked to the stock market - that your investment value can go down as well as up, and you may not always get back what you put in.

Therefore, whether it’s right for you is a decision only you can make, but it’s well worth getting advice from a financial adviser so you know what you’re investing in and whether it sits with the level of risk you’re comfortable taking.

You can buy either direct from financial companies, through a financial adviser, banks and building societies or a fund supermarket. But before you hand over your cash, make sure you know about the charges, what types of companies you would be investing in and that it fits with your goals and attitude to risk.

You could speak to a bank or financial institution you already have a relationship with, but bear in mind they may only advise you on their own products. If you want a view of the whole marketplace, it’s best to speak to an independent financial adviser.

Do your homework – there are lots of funds to choose from and it’s good to choose one to suit your personal financial circumstances.

Don’t be afraid to ask – if you’re unsure whether this is right for you, make sure you get financial advice.