If you are considering investing money you are likely to have come across OEICs. Here's how to choose the best OEIC investment.
OEICS unit trusts and investment bonds are three of the most popular ways of investing in world stock markets and they can offer a superior return when compared to traditional savings accounts.
What are OEICs?
An OEIC is an open ended investment company, an investment that lets you pool your money with thousands of other investors. Your cash buys shares in an investment company.
As the value of these underlying investments rise and fall, the value of your OEIC fund rises and falls accordingly.
While the best OEIC investment managers often produce inflation busting returns you are taking a risk with your money when you invest in an OEIC.
How are OEICs priced?
OEICs operate on what is known as a ‘single-pricing’ basis. When you invest, the mid-point between the cancellation and offer price of units is the price you will benefit from.
If you want to buy units in the OEIC fund then this is the price you would pay.
You are also likely to pay investment fees and this is something you need to take into account when you can shop around to find the best OEIC funds.
Securing the best OEIC prices
With around 2,000 shared investments in the UK it can be difficult to find the right open ended investment company for you.
Factors such as the level of risk that a fund takes and who the investment manager is will affect your buying decision, as will the underlying investments and fees and charges levied by the OEICS unit trusts or investment bonds.
When searching for the best OEIC funds you should consider two things that affect the pricing of your investment:
- Initial charges
- Annual fees
When you invest a lump sum into an OEIC you will generally pay an ‘initial charge’. This is a fee that is deducted from your initial investment by the OEIC provider.
In addition, you may pay an ‘annual fee’ which is a charge that is deducted on a yearly basis from your investment.
While you may pay slightly higher fees for the very best OEIC investment managers it’s generally advisable to invest in a fund with low charges. As the fees are subtracted from your investment, the more that is taken out in charges, the less that is left for you.
Always make sure that you compare the fees on the best OEIC funds before you invest as well as the level of risk to your money and the investment strategy taken by the company.
