More experienced, confident investors may wish to have a higher degree of involvement in choosing investment funds for their pension or ISA. This doesn’t necessarily mean going through every one of the 2,000 or more available funds individually. In this article we look at possible options for the more DIY-minded investor.
Selected or preferred fund ranges
Selected or preferred fund ranges are designed for savers and investors who want to pick the actual investment funds that their savings and investments go into, but who want some help in whittling down the huge choice available to a more manageable set of options.
These fund ranges are provided via workplace pensions, where the trustees or managers of the pension scheme will typically make 20 to 40 funds visible to the scheme members.
A similar service is also offered to people who save or invest via online saving and investment shops in ISAs and SIPPs. These shops tend to use their own investment experts to present a range of funds that they think have the best chance of delivering against their objectives, using detailed and analytical screening criteria.
In order to maintain an impartial approach, some online saving and investment shops with their own in-house investment funds choose not to include these funds in the selection process.
Distilling down the options
The selected fund ranges are usually divided into their separate asset class ‘sectors’ such as UK Equity Growth, European Equity Income, UK Fixed Interest, Property, and so on. There are usually only a few funds in each sector and there may be only one if that’s what the screening and selection process decides.
Across all sectors the total number of funds usually ranges from around 50 to 150*, depending on which online saving and investment shop you go to.
For some people, choosing from this limited range is much more manageable than trying to pick from all fund options. In addition, savers using this method have the additional comfort that the funds have been screened by investment experts using a range of analytical approaches. However, there’s no guarantee that the funds appearing in selected or preferred ranges will actually turn out to be the ones that best meet their objectives.
These lists are constantly revised by the experts who curate them, so savers and investors using this method of picking funds need to keep up to date with the list. They need to understand why particular funds have been removed, new ones added and so on.
The full choice of funds
People who are confident about investments may prefer to do their own research on the whole range of funds available. They might also choose to mix and match, choosing some funds on their own and some funds from the money shop’s selected range.
And, in addition to funds, people taking the full choice route can often also invest directly in the underlying investments themselves. These might be individual company shares, government and company loans and so on.
This is clearly the route to accessing the widest range of investment options, but it requires the individual to do their own research and monitor their selection’s performance. If you have an interest in investments and appetite to do the ground work, this could be the route for you.
Do you feel ready to make your own fund choices?
You’d need to be a confident investor with a good handle on the issues affecting share markets. To get a flavour of the kind of information you might need to take on board, it’s worth having a look at Aviva’s latest Market Review.
The value of investments can fall as well as rise and you may not get back the amount invested.
If you are unsure of your options we recommend you speak with a financial adviser who can give you a personal recommendation.
* Examples of selected or preferred ranges: Aviva Select Range, BestInvest Premier, Hargreaves Wealth 150, Fidelity Select List