a. Professional expertise – you arrange for an investment expert to pick investments for you, to watch those investments daily and judge when to sell them.
b. Spreading your risk – even if you have a small amount to invest, you can spread your money across a wide range of investments. You reduce the impact on your investment if, say, one company performs badly. Pooled investments will invest in one or more asset class.
c. Reduced dealing costs – if you want to buy a range of different investments directly, you might only be able to invest a small sum in each. This means dealing costs could eat into your profits. By pooling your money, you make savings because of bulk buying.
d. Less administration – the fund manager handles the buying, selling and collecting of dividends and income for you. They also deal with foreign stock exchanges and brokers, which can be tricky and time consuming.
e. Choice – there is a very wide choice of funds so that you can pick one, or many, that suit your precise needs.
3. Tax Wrappers. These are tax breaks that you can – subject to certain rules – wrap around your investment, to shield it from some or all tax. The wrapper can be around either the underlying investment or the pooled investment. Two of the most common tax wrappers are ISAs and pensions.