What is a fund?

Although the name can mean a lot of different things, you’ve most likely interacted with or set up a fund of your own at some point, be it a money pool at work or a savings fund for a rainy day. 

Regardless of the purpose, a fund has the same overall definition of a pool of money that is set aside for a specific purpose. Individuals and institutional investors place money into different types of funds to earn money. When you invest in a fund, you are effectively pooling your and other investors’ money together. 

A fund manager will then buy, sell or hold investments on your behalf. No matter the type of fund, they all share the same fundamental similarity that they are made up of a mix of investments to help diversify and spread your risk instead of focusing on one area. For example, a UK equity fund is likely to hold a wide number of stocks from a broad set of different British industry sectors.

Other types of funds include:

Exchange-traded funds (ETFs)

Funds traded on a public exchange similar to stocks

Hedge funds

Investments designed for high-net worth individuals or institutions

Mutual funds

Investment funds managed by professional fund managers who assign your investment into stocks, bonds or other assets