Although past performance is no indicator of future performance, market corrections can be healthy and result in even stronger growth in the future. This is why holding a diversified portfolio for the long term makes good investing sense. It’s time invested in the market, and not the timing of the market, which dictates long-term returns.
If you feel you do not have the time, knowledge or inclination to manage your own portfolio of investments, you can delegate responsibility for managing your money to a professional fund manager. Funds are collective investments, where your and other investors’ money is pooled together and spread across a wide range of underlying investments, helping you spread your overall risk.
Collective investment schemes are a way of combining sums of money from many people into a large fund spread across many investments and managed by a professional fund manager. Your money is invested on a pooled basis by an investment manager in return for a fee.
Tracker funds and exchange-traded funds (ETFs) are investments that aim to mirror the performance of a market index. A market index follows the overall performance of a selection of investments. The FTSE 100 is an example of a market index – it includes the 100 companies with the largest value on the London Stock Exchange.
Most collective investment schemes are actively managed. The fund manager is paid to research the market, so they can buy the assets that they think might give a good profit. Depending on the fund’s objectives, the fund manager will aim to give you either better-than-average growth for your investment (beat the market) or to get steadier returns than would be achieved simply by tracking the markets.