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How Should I Invest My Money


Investment Strategies And Age

Many people with pension plans think the job is done once they have made their contributions. They are oblivious to how and where the money is invested. In most UK schemes, investors are normally guided towards what is known as the default investment fund; an insurance company’s managed fund with mixed, but generally poor, performance.

A fund is a collective investment scheme whereby unit holder’s money is split across a portfolio of underlying investments, usually stocks (equities) and bonds (debts). The fund manager may actively manage the amount of money allocated to the different underlying investments using their expertise to cash-in on growth opportunities or to avoid risk. Or they may manage the fund passively, whereby the allocations are weighted in order to try to follow benchmark portfolio, such as the FTSE 100 index or the price of gold, for example. Passive funds are normally cheaper than actively managed investments.

To avoid having all your eggs in one basket, it is sensible to hold a diversified portfolio, spread across different assets ‐ stocks, corporate bonds and government bonds, property, alternative investments such as commodities and cash. It is also wise to spread these investments across different geographical areas and sectors.

A managed fund purports to do this, but it is rare that one company is good in all investment areas all of the time. A QROPS or SIPP allows you to pick a portfolio of specialist fund managers, each with demonstrable ability in their chosen area, or delegate the investment choices to a regulated discretionary manager, who will design a portfolio to fit your unique circumstances and objectives.

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