If you’re the type of investor that wants to gain exposure to the financial markets, but you don’t quite know where to start, it might be worth opting for an investment fund.
The reason for this is that investment funds require no skills, knowledge, or know-how in financial assets. On the contrary, the fund will manage your money on your behalf – so the entire investment process is passive.
In this article, we go through the top UK investment funds, the ins and outs of how investment funds work and the best investment fund brokers.
How to Invest in Funds : Step-by-step guide
Looking to get get started with a high-grade UK investment fund today?
Investment funds are fully catered to the average retail client, meaning that they make the investment process super-easy. In fact, by following the guidelines outlined below, you could have an investment fund account open in less than 10 minutes.
Step 1: Choose an Investment Fund Provider
To get the ball rolling, you will need to take your pick from a handful of good UK stockbrokers that allows you to invest in funds. To help you along the way, you’ll find our top five rated investment fund platforms listed in the section below.
1. eToro - 145 + funds to invest in
If you're looking to inject money into an investment fund for the very first time, it might be worth considering user-friendly platform eToro. The broker - which is regulated by the FCA, ASIC, and CySEC, makes the fund investment process super-easy. You can deposit funds with a debit/credit card, e-wallet, or bank account - and quickly verify your account by uploading your passport or driver's license.
With eToro you can get started with a $200 (about £160) deposit and the broker offers hundreds of investment funds from a range of sectors.
Once you are all set up, you will then have heaps of investment funds to choose from. These all come in the form of ETFs, which means you can enter and exit a trade whenever you wish. This also means that you can buy invest in funds without paying any trading commissions. Instead, it's only the spread that you need to look out for. As minimum investments start at just $25 (about £20), you can create a highly diversified portfolio of funds.
Platform Charge: £0
Fund dealing: 0% commissions
Min investment: $25 (£20) per fund
Transfer out fee: $5 (£4)
Payment methods: Debit/credit cards, Paypal, Skrill, Neteller, Western Union, UK bank transfer
- 145 + investment funds to invest it with 0% commissions
- Best investment fund platform for beginners
- Paypal accepted
- Limited technical analysis tools
- Not well-suited for the more advanced investor
2. Plus500 - Commission-Free ETF Investment Funds
Plus500 is a UK broker that hosts thousands of financial instruments. The platform is regulated by the FCA, alongside a number of foreign jurisdictions. This includes ASIC, CySEC, and MAS. Plus500 is a specialist CFD platform, meaning you will only be able to trade investment funds.
In Layman's terms, this means that you will be speculating on the future price of the fund. You can choose to go long (buy order) or short (sell order) on your chosen fund, as well as apply leverage. This makes Plus500 an ideal choice for those of you that wish to trade on a shorter-term basis.
Much like eToro, it takes just minutes to open an account, and you deposit funds with a debit or credit card, Paypal, or bank account. Minimum deposits are a bit lower at $100 (about £80), and there are no fees to get money in and out. Finally, Plus500 charges no trading commissions other than the spread.
Platform Charge: £0
Fund dealing: 0% Commission
Min investment: Depends on the fund
Transfer out fee: $0
Payment methods: Debit/credit cards, Paypal, UK bank transfer
- Minimum deposit of $100
- Over 2,000 trading instruments
- Mobile app available
- No education material
- Not suitable for beginners
3. IG - 8,000 ETF Investment Funds to Choose From
If you're the type of investor that likes variety, look no further than IG. The UK-based was launched way back in 1974, so it has a long-standing reputation in the brokerage space. To complement its 5-star reputation, IG is also regulated by the FCA - so your money is safe at all times.
In terms of its investment funds, you'll get to choose from just under 8,000 ETF funds. This covers funds from virtually every market - such as stocks, indices, REITs, hard metals, energies, and bonds. Regardless of the investment fund ETF that you opt for, you will be entitled to any income that the provider generates.
For example, if you invest in a UK stock index fund, you'll get your share of any dividend payments. Pricing is also super competitive at IG, with ETF investments starting from just 0.04% per year. This means that a £10,000 would cost just £4! If you decide to invest in a non-UK investment fund, you will need to cover a foreign exchange fee. With that said, IG charges just 0.5%, which is very competitive.
Platform Charge: From 0.04% per year
Fund dealing: 0% Commissions
Min investment: None
Transfer out fee: $0
Payment methods: Debit/credit cards, UK bank transfer
- Spreads from just 0.6 pips
- Overseen by top-tier regulators
- Instant account activation for Singapore citizens
- 1% deposit fee on Visa cards
- MT5 not supported
- MT5 not supported
4. Hargreaves Lansdown - Expensive, but Top-Rated for Research and Customer Service
Hargreaves Lansdown is one of the largest and most established brokers in the UK investment space. On top of stocks, corporate bonds, ETFs, and gilts - the broker offers a significant number of investment funds. On the one hand, Hargreaves Lansdown is somewhat expensive in the fees department.
For example, you'll pay 0.45% on all fund investments up to the first £250,000 and then 0.25% after that. On the flip side, there is no dealing chart, so it's only the annual fee that you need to look out for. With that said, it might be worth paying the higher fee to benefit from the platform's top-notch research department. Its customer service team is also highly rated.
Platform Charge: 0.45% up to the first £250,000
Fund dealing: None
Min investment: £100 lump sum or £25 per month
Transfer out fee: None
Payment methods: Debit cards, UK bank transfer
- Well established in the UK investment space
- Top-notch research department
- No withdrawal fees
- Slightly on the expensive side
Step 2: Open your account
Once you have chosen an investment fund provider that meets your needs, you will then need to open an account. Regardless of which broker you opt for, the process rarely takes more than a couple of minutes. If you choose to go with our recommended broker eToro, click on this link to open your account and get started.
Simply enter the following personal information:
- Full Name
- Home Address
- Date of Birth
- National Insurance Number
- Contact Details
You will also need to upload some ID. While platforms like eToro and Plus500 will ask for this straight away, the likes of iWeb and Hargreaves Lansdown are happy to wait until you request a withdrawal. Either way, you’ll need to provide a clear copy of your passport or driver’s license at some point, so it’s best to do this now.
Step 3: Deposit Funds
The next step will be to fund your account. In most cases, you’ll get to choose from an instant debit/credit card payment, or a bank account. If it’s the latter, expect to wait a few days for the funds to show up.
Brokers like eToro and Plus500 also support e-wallets and offer Paypal as a payment method.
The minimum deposit to get started with eToro is $200 which roughly equals to £160 in the UK.
Step 4: Choose an Investment Fund
You will now be able to select your investment fund of choice on eToro’s trading dashboard. eToro offers 145+ funds to invest in.
Depending on the broker you opt for, you’ll like have hundreds of funds at your disposal. As such, spend some time thinking about the kinds of assets that you wish to gain exposure to.
When choosing a broker, be sure that you will have access to a number of other markets in case you wish to diversify your portfolio. With reputable brokers, you will be able to not only trade investment funds but also buy shares and stocks. Brokers like eToro or Plus500 also offer excellent UK forex brokers.
What is an Investment Fund?
In the basic definition, an investment fund allows you to gain exposure to the world of financial assets without needing to do any of the work. Instead, by investing money with a fund, the provider will buy, sell, and trade assets on your behalf. This makes it an ideal investment channel for those of you with little to no knowledge of how investments work.
The great thing about investment funds is that you can often start off with really small amounts. This is because your money will be pooled together with tens of thousands of other investors. As such, the provider will typically have a multi-billion pound war chest. Crucially, this gives it access to asset classes that would otherwise be difficult to reach as a retail investor.
In terms of the fundamentals, you will receive your share of any profits the fund makes – proportionate to the amount you have invested. For example, if the fund provider receives 6% in dividend payments throughout the year – and you hold £10,000 at the platform, you’ll be entitled to £600, less fees.
You also stand to make money through capital gains. This is where the value of the assets held by the investment fund increases. This could be anything from stocks, indices, ETFs, gold, oil, natural gas, or government bonds. Either way, its profits are typically reflected in the share price of the fund. As such, you’ll need to sell your shares to realize any capital gains.
Different Types of Investment Funds
The term ‘investment fund’ is somewhat of a broad one, not least because it can refer to a number of different asset classes. Below, we outline some of the most common types of investment funds.
5 UK Investment Funds to Consider in 2020
Investment funds come in a full range of shapes and sizes. This might include a traditional fund that buys and sells stocks, or a fund that tracks the value of marijuana companies. In fact, there are literally thousands of funds to choose from in the UK, so knowing where to start can be challenging.
With that said, below we’ve listed 5 picks that you might want to consider in 2020.
1. Vanguard LifeStrategy 100% Equity
If you’re only looking to gain exposure to stocks and shares space, the Vanguard LifeStrategy 100% Equity fund is well worth considering. The fund is diversified across heaps of markets through stock indices. For example, this includes the FTSE 100 (UK), the S&P 500 (US) and the Japan Stock Index. The vast bulk of its portfolio is weighted in UK equities.
2. Vanguard US Equity Index Acc
If you’re looking for an investment fund that focuses on US-listed stocks, it might be worth considering the Vanguard US Equity Index Acc. In doing so, you’ll have a vested interest in almost 4,000 US companies. Think along the lines of Apple, Microsoft, Facebook, Berkshire Hathaway, and Visa.
3. Fidelity High Yield Factor ETF
Outside of the traditional stocks and shares space, it’s well worth considering a bond investment fund. One such example is the Fidelity High Yield Factor ETF. The fund manager will look to buy and sell a range of corporate bonds, so you’ll benefit from both passive income and capital gains.
4. Metropolitan West High Yield Bond Fund
The Metropolitan West High Yield Bond Fund is an additional bond fund is that worth considering. The fund achieved a rather healthy return of 4.1% last year. It purchases bonds from a range of sectors – with top-weighted holdings including private healthcare organizations and beverage suppliers. Once again, you’ll get income in the form of dividends and capital gains.
5. Vanguard LifeStrategy 80% Equity Fund A Acc
Looking to gain exposure to both bonds and stocks? If so, why not consider the merits of the Vanguard LifeStrategy 80% Equity Fund A Acc. As the name suggests, the investment fund has an 80% basket that consists of high-grade equities, with the balance made up of bonds. This is a great way to diversify across two different asset classes.
Investment Funds: 5 Things you Need to Know
If you’ve never invested in a fund before, the process might appear somewhat scary at first glance. With that said, below you will find five handy tips to help clear the mist!
In summary, investment funds are a great way to get involved in the financial markets without needing to have any knowledge of how trading works. They also allow you to profit from the investment space in a passive manner, as the fund provider will buy and sell assets on your behalf.
If you do like the sound of injecting money into an investment fund, it might be worth considering the merits of eToro. The FCA regulated broker offers hundreds of funds that can be invested in via a debit/credit card, e-wallet or UK bank account.
eToro: Best UK Stock Broker for 2020
- Choose from over 800 stocks, 0% commission
- Buy stocks outright or trade stock CFDs
- FCA, CySEC and ASIC regulated
What is an investment fund?
Investment funds buy and sell assets on your behalf, which allows you to gain exposure to the financial markets without needing to do any of the work.
What payment methods do investment fund providers accept?
Most regulated investment fund providers allow you to deposit funds with a debit/credit card or bank UK account. The likes of eToro and Plus500 also support e-wallets like Paypal.
What types of investment funds are there?
Investment funds come in a range of shapes and sizes. This includes mutual funds, ETFs, hedge funds, and CFD funds.
What is the minimum amount I have to invest in a fund?
Some brokers have no minimum investment requirements at all, which is great if you want to start off with small amounts