Whether it’s termed ethical, responsible or sustainable investing, the aim is generally the same. It’s investing your money in businesses which have some intention of making the world a better place. In the past, ethical investing was the only option if you wanted to invest in companies aligned to your values. But this ‘good money’ sector has moved on a lot in recent years.
Making investment decisions on behalf of the investor
There are many reasons to invest through a fund, rather than buying assets on your own. At a basic level, investing in a fund means having a fund manager make investment decisions on behalf of the investor.
Combining sums of money from many people into a large fund spread across many investments
Pooled investment funds – also known as ‘collective investment schemes’ – are a way of combining sums of money from many people into a large fund spread across many investments and managed by a professional fund manager.
Market index following the overall performance of a selection of investments
Tracker funds and exchange-traded funds (ETFs) are investments that aim to mirror the performance of a market index. A market index follows the overall performance of a selection of investments. The FTSE 100 is an example of a market index – it includes the 100 companies with the largest value on the London Stock Exchange.
Stock market return linked but with fewer ups and downs than investing directly in shares
If you save regularly or invest a lump sum using a life insurance policy, you might choose to invest in a with-profits fund. These aim to give you a return linked to the stock market but with fewer ups and downs than investing directly in shares. However, they are complex and are not as popular a form of investing as they used to be.