An investment fund is simply a structure that allows the money of many investors to be pooled together. This means that they can invest across a more diverse range of investments that they would have been able to access by themselves.
In the past, if someone wanted to invest in stocks and shares, they would have needed a lot of money to do it properly. This is because it is risky to own shares in just one company because everything depends on that company doing well forever. Even the most well run companies can have a bad year and even the most well known names sometimes go out of business.
To protect against this, investors have to be able to buy many holdings that act differently to each other so that if one does not work out, there will be many others that do.
This is what we mean when we talk about ‘not putting all of your eggs into one basket’ and is the principle behind pooling investors’ money together – you benefit from a more diverse portfolio than you could construct by yourself.
As an investor you own units in the fund which can then be sold whenever you want your money back. This process takes around 4 days.