A way for individual investors to pool their money together, allowing them to invest in assets that would otherwise be unobtainable. Generally refers to unit trusts, though investment trusts and exchange traded funds are also forms of 'collective investment'
The most common type of fund, so called because you buy 'units' of the fund. (The Yanks call them 'mutual funds', and you may hear of 'Oeics' – they're basically the same thing.) They are 'open ended' in that there is no limit to the size of the fund – units are created or destroyed to meet investor demand
The oldest form of collective investment, these are traded like shares on the London Stock Exchange. Unlike unit trusts, they are 'closed ended' so you can only buy shares from an existing investor. This means the price of the investment trust is not tied directly to the value of the trust's assets
Exchange traded fund (ETF)
A relatively recent addition to the investor's toolbox, ETFs track the value of an index (such as the FTSE 100, or the price of gold) relatively cheaply. They are traded as shares on the London Stock Exchange
The person who decides where the fund's money should be invested. As such, finding a talented manager (such as those with a Citywire rating) is of paramount importance.
A measure of how your investments have performed, relative to your initial investment. For example if you invest £1,000 in a fund, and a year later your investment is worth £1,100, you've made a 10% return.
Funds are grouped together into sectors, allowing fund managers to be judged against their benchmarks and peer group. Each sector has rules about what assets funds are allowed to invest in.
A measure of how different areas of the markets are performing, against which funds can be compared. For example, a fund in the UK Equities sector might be compared against the FTSE All-Share index of every company traded on the London Stock Exchange. A good fund manager will be able to beat the benchmark most of the time, but very few can.