Popular investments at a glance

The most popular types of investments are investment funds where your money is pooled with other investors and spread across a variety of different investments. This is called ‘diversification’ and helps to spread risk.

Investment products

You can invest directly in investments, like shares, but a more popular way to invest in them is indirectly through an investment fund.

There are many different ways to access investment funds, typically through investment and pension providers, for example through their products such as an ISA or your workplace pension.

The table below briefly describes the most popular ways to invest your money.

You can read more about each by following the links.

Also, refer to the note below the table on how the level of fees charged might impact any potential return you receive.

Direct investments How it works
Shares Shares offer you a way of owning a direct stake in a company - also known as equities. Their value rises and falls in line with a number of factors which might include the company’s performance or outlook, investor sentiment, and general market conditions.
Investment funds (indirect) How it works  
Unit trusts and open-ended investment companies (OEICs) Funds managed by a professional investment manager. There are lots of different strategies and risk levels to choose from and they can invest in one or more different asset classes.  
Investment trusts Another form of ‘collective’ investment where your money is pooled with that of other investors and managed by a professional investment manager. Investment trusts are set up as companies with their own boards of directors and they are listed on the stock exchange. You invest in the fund by buying and selling shares in the investment trust either directly or through the products listed in the next table. Once again, there are lots of different strategies and risk levels to choose from.
Insurance company funds Investment funds run by life insurance companies. When you invest through an insurance or pension product (see table below), you often choose how your money is invested. The choice might be from the insurance company’s own funds or into investment funds equivalent to those run by other managers.
Tracker funds Some investment funds adopt a ‘tracker’ strategy. The value of the fund increases or decreases in line with a stock-market index (a measure of how well the stock market is doing). Tracker funds often have lower charges than other types of fund. Similar to tracker funds are Exchange Traded Funds (ETFs), which also aim to track particular indices. ETFs, unlike tracker funds, are traded on the stock market.
REITs These are a special type of investment trust that invests in property. Similar OEICs are called property authorised investment funds (PAIFs).
Investment products (indirect) How it works
Stocks and Shares ISAs A tax-free way of investing in shares or investment funds, up to an annual limit (currently £20,000 for 2021/22). Many unit trusts and OEICs come pre-packaged as ISAs. Alternatively, you can choose for yourself which investments and funds to put in your ISA.
Workplace pension A way of investing for the future, with a ‘top-up’ contribution from your employer and tax relief from the government. Your money is invested in pooled funds.
Personal pension A way of investing for the future, with tax relief on your personal contributions from the government. Your money is invested in pooled funds. You can use a personal pension if you don’t have access to a workplace pension. You don’t want to miss out on your employer’s contributions.
Investment bonds A life insurance contract that is also an investment vehicle. You invest for a set term or until you die.
Endowment policies A life insurance policy that is also an investment vehicle. It aims to give you a lump sum at the end of a fixed term. Often you choose which investment funds to have in your policy.
Whole-of-life policies A way of investing a regular amount or a lump sum as life insurance. It pays out on death, and is often used for estate planning. Often you choose which investment funds to have in your policy.

How much money will you get back?

There’s no guarantee of how your investment will perform. In the case of company shares, it depends on the company’s performance and the economic outlook.

With funds, the chance of losing money or making a profit depends on the mix of different investments in the fund and the underlying performance of your selected funds. Fund values can fall as well as rise and you may not get back the full amount you invested.

A way to spread your risks is to choose a range of different ‘Asset classes’.

For example, choosing a fund that invests in a mix of:

  • Cash
  • Bonds
  • Shares
  • Bonds and property, or
  • Investing in several funds

each investing in a different one of these asset classes.

A note on fees

Fees and charges can reduce your investment earnings. When you invest directly, you usually have to pay dealing charges - when investing in funds you pay management charges.

Fees vary by fund, product and provider and won’t always be easy to spot. The most common type of charge is an annual management charge (AMC) which is a percentage of the funds under management each year, for example 1%.

Changes to the Key Investor Information Document (KIID) saw the Ongoing Charges Figure (OCF) replace the Total Expense Ratio (TER).

The aim was to allow investors to directly compare costs and shop around for value.

In general the OCF is the same as the TER, but makes it clearer to investors that it covers charges that are applied on an ongoing basis and not just the total costs.

Read our guide on Understanding investment fees

Next steps

Once you know which type of investment, fund or product might suit you, you’re ready to think about investing.

Read our guide below to find out more.

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