A fund is made up of a variety of different types of investment. For example, a European Fund would typically consist of the shares of 100 different European companies based in France, Germany, Switzerland, and Italy etc. A Balanced Managed Fund, on the other hand, might consist of shares in 40-50 UK companies as well as some commercial property (like office blocks) and different fixed-interest securities like Government and corporate bonds.

The major benefit of funds is that your investment is spread over a wide range of assets, which in turn can reduce the risk.

When you invest in a fund, your money is used to buy a number of units – which represent your share of the assets of that particular fund. For example, if you invest £1,000 in a fund where the price of units is £1, then you will own 1,000 units. If, when you come to sell your investment, the price was £1.20 then your investment would be worth £1,200 (1000 x £1.20), but if the price was 80p, your investment would be worth £800.