Investing in an Open Ended Investment Company can be a very simple way to spread investments across a wide range of assets without the need to spend the time managing them yourself.
A medium to long-term investment, OEICs were introduced in 1997 and are similar in principle to unit trusts. However they enable the investor to own shares in the asset rather than just buying units. Your money is pooled with that of other investors into a shared fund which is professionally managed. It is 'open ended' so the number of units in the fund depends on supply and demand (this is the difference between OEICs or unit trusts and investment trusts link which have a fixed number of shares). Shares are created or cancelled as
people join or leave the fund. The value of the underlying assets in the fund determines the price of the units on a day-to-day basis.
OEICs were introduced to make charges clearer for investors. There is no bid/offer spread so the same price is used whether buying or selling shares. Charges do vary but usually involve:
· Initial investment charges
· Annual management fees
· Exit charges on encashment.
Your investment can go down as well as up, but as the funds are pooled and spread the risk is less than if the money was all invested in one place. However, you can choose your own level of risk and the provider will give you details of how the funds are invested and a risk profile.
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