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Fund choice puts millions off investing: how to pick the right one

Joanna Faith
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Joanna Faith

More than 4.4 million regular savers have been put off investing because they think it’s too hard to choose from the thousands of funds on offer, new research reveals.

Data from mutual Scottish Friendly shows more than one in three UK adults who regularly save £100 a month say they find the number of funds available confusing and that this has stopped them from investing in the past.

Meanwhile, nearly a third of people who already invest said they’d prefer there to be fewer funds on the market – preferably less than 50 rather than 2,000 plus currently available.

Kevin Brown, savings specialist at Scottish Friendly, said: “Many potential investors are telling us that too much choice can be off putting and confusing.

“There are thousands of funds on offer to UK investors at the moment, so it’s no surprise so many people feel confused. At the end of the day, how is someone who is new to investing meant to wade through all of these choices and put together their own portfolio?”

Tips to picking the right fund

Set your goals

Everybody has different savings goals, whether it be retirement, to pay for a child’s wedding or to save for a house. Your savings goal may determine how you invest your money, so be clear about that from the beginning. For example, you may want to invest in the stock market to give your money access to its growth potential if you’re investing for the long-term, for example retirement, but maybe not if you’re saving for a house deposit and are looking to buy in the next year or two.

How much risk do you want to take?

Once you know what you’re saving or investing for, it’s time to think about how you might achieve your goals. Each individual is different, so think carefully about how much risk you are willing to take.

Keep an eye on fees

Fees can eat away into your investments, so it’s a good idea to check them out. If the fund you pick has high fees, then it has to perform that much better just to give you good returns. But equally, no one really wants a lower charge fund that consistently performs poorly. Therefore, it’s important to get the right mix and that might involve consulting a financial adviser if in any doubt. And remember, just because a fund has performed well in the past, does not mean it will in the future. So bear this in mind.

Diversity is key

We’ve all heard the saying “don’t put all of your eggs in one basket”. The same could be said when it comes to investing. Spreading your money across a number of different regions and asset types could ensure you are better protected if one of them underperforms.

Review regularly

Just because you have picked your funds, it doesn’t mean you’re finished. Regular reviews could ensure you are on track to meet your savings goals. You might not want to check your portfolio every day, but it could be worth having a sit down once or twice a year.

For more on picking your own funds, see: VIDEO: Are ‘best buy’ lists the answer to the fund picking conundrum?