Types of investment
Your guide to making money work for you
Making investment decisions can feel daunting at the best of times, with the often baffling array of possibilities and choices. It’s even more difficult when information is peppered with jargon and complex calculations.
At J.P. Morgan Asset Management, we work hard to clarify the world of personal investments – making life as simple as possible for our clients.
Take a look at the investment types we can offer you. Whether you have £1,000 or £1m to invest, it’s easier than you might imagine to match our investment options to your objectives.
Two types of investment
J.P. Morgan Asset Management offer two types of investments: OEIC funds and investment trusts.
These two types of vehicles have a lot in common: Both pool investors’ money and invest it – so every investor shares in the performance of a large and widely-diversified portfolio. They are managed by professional fund managers so all the day-to-day investment decisions are taken care of.
But there are also some differences to be aware of:
OEIC funds
OEIC funds are open-ended investment companies. Being ‘open-ended’ means OEIC funds can create or cancel shares to meet investor demand. A fund’s share price directly reflects the value of its portfolio of investments. So when the portfolio rises in value, the fund’s share price goes up – or drops when the portfolio’s value falls. OEIC funds are not allowed to borrow money to invest to the same extent that investment trusts can, which means they do not run the risks of being ‘geared’ to the same extent. OEICs are regulated by the Financial Services Authority.
Investment Trusts
Investment trusts are public limited companies (plcs). They have a fixed number of shares, which are traded on the stock market, like any plc. Because they are traded on the open market, an investment trust’s share price is driven by demand – and could be higher or lower than the value of its investment portfolio, e.g. traded at a discount or a premium.
Investment trusts have more freedom than OEIC funds to enhance potential returns for shareholders by borrowing capital to invest. However, trusts that use ‘gearing’ can be higher risk as it can exaggerate gains and losses. Investment Trusts are not regulated by the Financial Services Authority.
Find out more about Investment Trusts
If you are in any doubt about the suitability of an investment, please speak to a financial adviser.