INTRODUCTION
If you are saving for retirement through a pension or just building a savings nest egg, funds - whether unit trusts and OEICs (open ended investment companies) - are a great way to save. If you can afford only a small sum, funds offer a way of spreading risk, whilst giving your savings exposure to almost any conceivable sector. Using funds you can, for instance, invest a portion of your pension in small Japanese companies!

Unit trust and OEIC funds also give the private investor the chance to benefit from the skills of an experienced manager, who runs their money under the constant spotlight of one of the world’s most competitive industries. Like Premiership footballers, fund managers become stars in their own industry. They are scrutinised, lavished with praise and all too easily discarded when their skills wane.

This site, Citywire, is dedicated to following their performance closely! You can use it to carefully assess how individual funds and fund managers have performed. To see how click here.

Choosing which fund to back can be a baffling process. Different types of funds are split into sectors, but within, for example, the UK All Companies sector alone there are over 300 funds.

Add to that the marketing emblazoned across billboards by companies claiming to be the best of the best and you have a confusing picture.

This guide aims to help investors make the crucial decisions for their savings or pension plan. It will also help you as a fund buyer understand how these investments works.

1. WHAT IS A FUND?
In essence a fund is a pool of money provided by lots of different investors.

Unlike investment trusts, funds are ‘open-ended’ which means that investors can put in and take out their savings at will. When an investment is made an investor will own either shares or units in the fund. The difference between the two is largely academic for the private investor, but is based on the fact that there are two types of open-ended funds in the United Kingdom, Open Ended Investment Companies (Oeics) and unit trusts. With OEICs there is one price for buying and selling with a small charge on top, with unit trusts there is a spread. There is no difference in the tax treatment.