Stocks and shares may sound exciting, but they can go up and down in value. That’s why it’s a good idea to spread any risks you take, perhaps by using a collective investment like an OEIC.

By investing in an OEIC (or Open Ended Investment Company), you’re spreading the risks involved with thousands of other investors, all hoping to make some money over a period of time. Other collective investments include Investment Bonds and Unit Trusts.

How does an OEIC work?

You’ll own shares in the Open Ended Investment Company itself. The OEIC’s fund managers will buy and sell assets on your behalf (things like shares, stocks and gilts that are traded on stock markets around the world, or other investment opportunities such as property), and hopefully increase the value of your investment in their business. ‘Open ended’ refers to the fact that the assets (represented by your shares), can be changed, bought or sold at any time. You can usually invest from £25 per month to £500 as a lump sum – but you’ll get access to opportunities that otherwise wouldn’t be open to individual investors.

Whichever OEIC you choose, it’s important to understand the level of risk involved. For example, an OEIC that buys shares in large UK companies carries lower risks than one investing in emerging markets – places like Brazil, China, Russia and India. There, the markets are still volatile, and the fluctuations in currency can also affect the value of your investment.

An OEIC can go down in value as well as up, and you may not get back what you invest – but collective investing may fit into your long term plans quite well. So why not find out more about investing in an OEIC, and get in touch with an independent financial adviser (IFA) in your area?

Questions you might like to ask an IFA…

Which type of OEIC will match my attitude to taking risks?

Is there a minimum amount of time my money should be kept in an OEIC?

Will I get any interest or dividends on my money, while it’s in the OEIC?

What are the charges involved, and what are they for?