Open-Ended Investment Companies (OEICs) are a type of collective investment where you invest your money alongside other investors, spreading the risks involved. If you invest in an OEIC you buy shares in the Open-Ended Investment Company itself. They will then use the money pooled from all the investors to buy assets on your behalf, such as stocks and shares, gilts, and property.
As you own a share in the OEIC, the value of the assets that company has invested in will determine the value of your share. So if the value of the assets increases, so will the share price at which you can sell your share. Similarly if the value of the assets decreases, the share price will decrease too. The investment is ‘open-ended’ as the assets (represented by your shares), can be changed, bought or sold at any time.
OEICs can be a suitable investment type if you want to invest in assets such as stocks and shares but do not have the knowledge or expertise yourself. You will usually need to invest at least £25 a month, and can put in up to a £500 lump sum. If you are going to invest in an OEIC it’s important to understand the level of risk involved. Some investments involve more risk than others – for example investing in emerging markets like China and Brazil will be more high risk that investing in the UK. It’s a good idea therefore to make sure you know what kind of assets the OEIC invests in to make sure they fit in with your investment plan.
Why not find out more about OEICS by speaking to an independent financial adviser, who can help assess your financial situation to see if this is the right investment strategy for you. Search for an independent financial adviser here.
Questions you might like to ask an IFA …
- What are the charges involved, and what are they for?
- Which type of OEIC will match my attitude to taking risks?
- Will I get any interest or dividends while my money is in the OEIC?
- Is there a minimum amount of time my money should be kept in an OEIC?