Want to start investing in the markets? Looking for some help with managing your investments? Then funds, or collective investments, are worth considering for your portfolio.
Funds explained
A fund is a type of pooled investment used by a fund manager to deal in a variety of shares and other assets. The vast range of funds available lets you invest in things that suit your objectives, such as:
- A particular geographic market
- A range of industry sectors
- A specialist asset class, such as bonds
One of the major advantages of funds is they allow you to build a diversified portfolio cost-effectively. By investing even a few hundred pounds in a fund, you can get exposure to far more companies and indices than you could by putting money directly in the market yourself.
How do funds work?
There are two main types of funds – active and passive.
Active funds
Active funds are run by a professional fund manager who selects what goes into the portfolio. The aim is to beat their benchmark index and outperform the market to give you premium returns.
Passive funds
Passive funds (or tracker funds) aim to mirror – or track – the performance of a key benchmark or index, such as the FTSE 100.
Find out more about the differences between active and passive funds.
How are funds priced?
Funds are usually priced once per day. This happens at a time set by the fund manager and is decided by the individual prices of the underlying assets.
What are the benefits of investing in funds?
There are many advantages to investing in funds, such as:
- Portfolio diversification: When you buy a fund, you get access to the range of investments it holds. As many funds invest across the globe, this means you get exposure to markets and companies that are not normally easy to deal in directly.
- Expert fund management: If you choose an active fund, the fund manager will aim to beat their benchmark – if you pick a good one, you may do better than the overall stock market.
- Choice: You can choose from over 2,000 funds with us, many of which offer access to specific asset classes, markets or geographical locations.
- Easy to manage: Your fund manager will make the investment decisions for active funds, so you don’t have to follow the markets, while passive funds track the fund benchmark or index.
- Flexible: You can hold your funds in many different accounts, including tax-efficient Stocks and shares ISAs or SIPPs.
The different types of units or shares
When buying funds, you will often see the acronyms ‘Inc’ or ‘Acc’ after the name of the fund. These indicate the different classes of funds. Knowing these, you can choose the type of units that suit your investment strategy and time horizon.
- An 'income' class class pays out dividends directly into your Dealing account, ISA or SIPP.
- An 'accumulation' class, rolls up dividends and other forms of income and puts them back into the fund, with the effect of increasing the value of each unit or share held.
If you need a hand choosing your investments, you can get a few suggestions from our specialists – or even let them do the hard work for you. Just have a look at our easy investment ideas.
How to buy funds online
It’s easy to invest in funds online. You first need to open an AJ Bell account. Then, browse and choose the fund that matches your investment goals. There are over 2,000 funds to choose from – to make it easier for you, we've created the AJ Bell Favourite funds list which is our pick of the top funds in the market for various criteria.
There's a low-cost £1.50 dealing charge for buying and selling funds, and an account charge for holding the fund with us. In addition, you'll pay the fund manager's charge for your chosen investment. These charges are included in the fund price and can be found on the fund factsheet.
To view our costs for dealing and holding funds, please visit our charges and rates page.
Follow these steps to learn how to buy and sell funds on the AJ Bell website.
Each fund on the AJ Bell platform has a research page which includes essential information about the ongoing charges, dividend frequency and daily cut-off time for pricing. It is important you visit this page before buying a fund and you must also make sure you read the Key Investor Information Document. You will need to decide whether you would like to buy income or accumulation units during your research.
You can buy and sell funds by clicking the buy and sell buttons on the fund page,
or by visiting the ‘Buy and sell’ page from within your account. Here you can search for funds before clicking ‘deal’. You will then be asked to enter the details of your order. Orders in funds are not executed immediately but at the next valuation point. Each fund will have a cut-off time for dealing that day, and after that time, deals are executed the following day. First, select which AJ Bell account you would like to place this deal from. This will bring up your available cash balance. Then, choose if you are buying or selling.
First we are going to look at buying a fund. Enter the amount of money to invest, and then choose whether you would like to include or exclude the dealing charges within this amount. You must confirm that you have read the Key investor information document and, where available, the supplementary information document. This document sets out the aims and risks of the fund as well as any initial and the ongoing charges payable. Clicking review order will give you a summary of your order, which shows the fund, the order type, and the price, consideration and the dealing charge. The price is indicative, based on the last known price, and the order will be placed at the next valuation point. The price you will pay will be confirmed on your contract note.
If you are happy with your order, click ‘submit order. You will then see an on-screen confirmation of your order.
Clicking ‘view active orders’ will show the current orders on your account, and you will be able to see the status of your order. The fund holding will appear in your portfolio when we receive confirmation of the price; this is normally the day after the deal has been executed.
If you wish to sell a fund, click ‘deal’ on the holding in your portfolio. You can then select ‘Sell’ or ‘Sell all’ in the buy/sell screen. If you select ‘Sell’, you can enter an amount of money you wish to raise, and you must specify whether you want this to include or exclude the dealing charge. You can also choose to sell an amount of units. Your current holding will be shown under the ‘Quantity’ box. Once you have entered all the details, click ‘Review order’. Review the information, and if you are happy with the fund details, consideration and dealing charge, click ‘Submit order.’
You will see a confirmation of your order, and by clicking ‘View active orders’ you can see the status of your order. Details of your fund sale will appear in your portfolio once we have received confirmation of the price, this is normally at the start of the next business day. Alternatively, you can select ‘sell all’ in the order screen, which will sell all of your current holding of that fund. You will see your current holding on screen.
Once we have received confirmation of the price, you will receive a secure message letting you know your contract note is available. The contract note shows the details of your purchase or sale, including the quantity, price and dealing charges.
If you have any problems placing your order, you can give dealing services a call on 0345 37 33 479, and they will be able to help you with your deal.
Can I invest in funds regularly?
You can invest as little as £25 per month into a wide range of funds with our regular investment service. Simply set up the instruction online and we'll invest each month for you into the fund of your choice. This is a great way to save regularly and build up your portfolio.
Why invest in funds with AJ Bell?
Low-cost dealing charge of just £1.50 for buying and selling
Deal online and on the go with our free mobile app
Regular investment service allows you to automatically invest as little as £25 per month and pay nothing in dealing charges
FREE access to our monthly Shares magazine
Wide range of funds available – over 2,000
Dividend reinvestment available across a range of shares, investment trusts and ETFs
Get your money working for you
Our investment accounts
Ready to put your money to work? Then you’ve come to the right place.
Investment options
See the full range of investments that we offer, from stocks and bonds to AJ Bell managed funds.
Free regular investing
Get into the investment habit by putting in as little as £25 per month, and pay no dealing charges.
Disclaimer: The value of your investments can go down as well as up and you may get back less than you originally invested. The AJ Bell funds and Favourite funds list aren't a personal recommendation. We don't give investment advice, so you should talk to a (suitably qualified) financial adviser if you're not sure where to invest.