How to choose investment funds

Stuck on which funds to invest your money in? Here are some tips to help you decide.

One of the golden rules of investing is to not put all your eggs in one basket. Investing in funds is one way to get that all-important diversification. But, with so many funds available, it can be hard to know where to start.

We asked Shanaka Cristofoli, a financial adviser in the Aviva Financial Advice team, to share his insights on how to pick the funds that are right for you. Before you read his words of wisdom, make sure you’ve got your head around the basics of investing in funds.

Remember, whichever investments you end up making can go down as well as up and you could get back less than you invested. 

What to think about when you’re choosing your funds

Risk and return

“Before choosing your funds, ask yourself two questions upfront,” says Shanaka. “What return are you hoping for? And how much risk are you prepared to take?” 

In investing, risk and return are linked. Risk refers to the possibility of an investment falling in value. As a rule, investments that have a higher level of risk usually have the potential to deliver a higher rate of return – but there’s also the chance there’ll be a greater loss. 

“How much risk you’re willing to take with your investments is a very personal choice and depends on your circumstances,” says Shanaka. “If you’re new to investing and happy with a lower (but potentially steadier) return, investing in funds with a lower level of risk might be better suited to you.”

To lower your risk level, there are three rules to remember:

  1. Choose a large proportion of lower risk investments.
  2. Diversify your portfolio by investing across multiple companies, sectors, and regions.
  3. Be willing to invest for at least five years.

To give you a good idea of the risk you’re taking when you invest, we give all our funds a risk rating between 1 and 7 (1 = lowest volatility, 7 = highest volatility). Read more about our risk ratings here.


“I can’t emphasise this enough: investing isn’t free,” says Shanaka. “The platform you buy your funds from will, at the very least, charge you an annual fee, and you may pay an additional fee for the management of the fund.”

With all Aviva direct investment products, you’ll pay what’s called an Aviva Charge, which is up to 0.40% a year of the value of your investments. There’s also a Fund Manager Charge – how much this is depends on the funds you pick. Find out more about our fund charges here.

“You’d be surprised how many people don’t know what they’re actually paying for their funds,” says Shanaka. But, while you should make sure you’re aware how much you’re paying, cost alone shouldn’t dictate which ones you choose. 

As with most things in life, you get what you pay for. “An actively managed fund might charge you more than a passively managed fund, but the approach is more hands-on which gives you more insight into your fund management”, explains Shanaka. 

Check independent fund ratings

Third party ratings agencies like Morningstar, Standard, and Poor’s and Moody’s review funds, categorise them, benchmark them and give them grades. They’ll highlight things like consistent returns and risk control, and the idea is that you use these insights to help you pick your own funds. 

“While checking independent fund ratings is a useful guide, use it as just that – a guide,” suggests Shanaka. “You should think of ratings as one factor in the context of all the other things we mention here.” 

Past performance figures

You can check the track record of a fund by looking at its fund fact sheet. You  can also look on an independent ratings agency’s website. “While you shouldn’t use past performance to see whether a fund will continue to perform well – nothing is a given in investing, after all, and past performance isn’t a reliable teller of how the fund might perform in the future – it can be a useful way to check whether the fund manager has delivered previously or not,” says Shanaka. “It’s also a good way to check whether a fund has been managed consistently by the same manager over the years.”

ESG factors

If you’re not a fan of acronyms, this means Environmental, Social and Governance factors. ESG investing is about whether the fund is invested in assets that are meeting or going beyond their  environment or social criteria, and are ethical and transparent in their management approach. 

“With so many ESG funds available now — there’s no reason that you can’t put your money into sustainable causes and hope to get a financial return, too,” says Shanaka. You don’t have to choose between your values and your returns anymore. 

Take a look at Shanaka’s tips on choosing an ESG fund that’s right for you.

Ways to buy funds

Now you’ve got an idea of the things to consider when you’re buying funds, it’s time to decide how to buy them. First off, “decide whether building your own investment portfolio is right for you, or you’d rather have some help from an expert,” says Shanaka.  

Ready-made funds

If you don’t have the time, knowledge, or desire to put together your own porfolio, you might want to go with a provider’s ready-made option. Ready-made plans can be a good option if you’re new to investing because they basically do the hard work for you. All you have to do is choose how risky you want to be with your investments, and you'll be presented with a portfolio made up of funds to match that risk level. 

We keep it simple with four options: Lower, Lower to Medium, Medium to High, and Higher. 

Experts’ shortlist

If you want more control than a ready-made option, but still want expert guidance, then look at your chosen platform’s best buy list – here, we call it the experts’ shortlist. 

These lists are put together by in-house analysts and are based on things like previous performance, good management practices, or being good value. You can find out more about how our experts pick their shortlist here. 

There’s no guarantee that these best buys will perform better than any other funds, but the list could give you some investment ideas and may provide some peace of mind.

Full fund range

If you’re confident you can choose funds yourself, you could self-select from the full list of funds. Some providers make this really easy for you by providing a range of filters so you can select the funds that meet your values or objectives – and we’re one of them.

Whichever approach you choose, you can do them all on the Aviva investment platform.

Aviva Financial Advice

If you’d like a fully personalised investment portfolio, but don’t have the time to build it yourself, you could speak to Aviva Financial Advice. An Aviva financial adviser can evaluate all your investment products and develop a personalised plan for you based on your investment goals.

You won’t pay anything until you ask your adviser to go ahead and build your personalised plan. Just so you know, our advisers can only recommend Aviva products and services, except for annuities where they can recommend products from other annuity providers.

If we can’t help you, we can put you in touch with one of our trusted partners. If you have your own financial adviser, speak to them.

Tax-efficient investing

It makes sense financially to make sure your investments are as tax-efficient as possible. The Aviva Stocks & Shares ISA is one way to do just that. You can be as hands-on as you want when it comes to picking the funds your ISA is invested in, and you can withdraw your money whenever you need to.

Please note that tax rules are subject to change and dependent on the individuals circumstances.

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