It’s important to invest in strong-performing funds that provide value for money when pursuing your investment goals and strategy. The challenge is that there are over 100,000 collective investment vehicles worldwide and about 4,000 funds for sale in the UK. As a private investor, researching and selecting these funds can be difficult. Plus, the fund market is constantly evolving with new product launches.
Unbiased selection process
The cornerstone of an unbiased approach is to choose from all available funds and not restrict yourself to certain providers or product types. Best-in-class products can either be active funds or passive vehicles. Active funds aim to outperform a chosen benchmark, while passive funds aim to replicate and track the performance of a market index. Active funds may struggle to outperform passive alternatives – which have lower fees – in some markets, but have better chances in other sectors.
Choosing the right funds
A fund selection process involves a number of stages. It usually starts with an initial screening (eg. minimum fund size), before analysing historical performance over different time periods and market conditions (eg. when equity markets have gone up or down). A qualitative assessment is the most critical, challenging and time-consuming step to establish the likelihood of strong performance being repeated going forward, and in what type of market circumstances. Due diligence thoroughly investigates a fund’s strategy, processes, and team.
Ongoing monitoring after the selection of a fund typically incorporates measures such as monthly and quarterly performance analysis and scrutiny of any changes to the investment process, strategy, or fund management team.
Professional expertise can provide value for money, and help avoid some of the potentially costly traps that private investors can fall into. Find out more about Lumin’s investment approach by calling 03300 564 446 or get in touch via our contact form.
This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
