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A mutual fund is a type of investment in which your money is pooled together with that of other shareholders. This gives you the benefit of owning shares in a collection of investments you may not have been able to afford as an individual.
Mutual funds are overseen by a fund manager, who will invest in various stocks, bonds and assets on your behalf.
This type of investment is seen as less risky than a single investment, as you’re splitting your money into different assets. You’ll also benefit from the guidance of a financial expert, who’ll make decisions based on their experience and market research.
The value of investments, and the income from them, can fall as well as rise. Therefore, they’re not guaranteed. The investor might not always get back their initial investment.
You’ll pay money to a fund management company, which will make investments on your behalf across various assets to build up your portfolio. If these investments perform well, you’ll see a return in either dividends, capital or shares.
You can withdraw money from an open-ended mutual fund whenever you like. However, you may sometimes have to pay a penalty charge if you withdraw within one month.
Mutual funds can be less risky than stocks alone, because your portfolio is spread across more assets. Remember, the value of all investments and the income from them can fall as well as rise. They are not guaranteed and the investor might not get back their initial investment.
You are liable to pay tax on any income generated on certain investments. The tax you pay depends on the type of investment and returns. For instance, funds within an ISA are exempt from tax, whereas stocks and bonds are liable to income, dividends, and capital gains tax.
Halifax is a division of Bank of Scotland plc. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ. Bank of Scotland plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 169628.
Schroders Personal Wealth is a trading name of Scottish Widows Schroder Personal Wealth Limited.