THERE are many reasons to invest through a fund rather than buying individual financial assets.

At a basic level, investing in a fund means having a fund manager make investment decisions on behalf of the investor.

You receive reports on the fund’s performance but have no influence on the investment choices short of removing your money from the fund and placing it elsewhere.

Spreading risk is one of the main reasons for investing through a fund.

Even if you have a small amount to invest, you can have a lot of different types of assets you’re investing in – you’re ‘diversified’.

You can spread risk across asset classes (such as bonds, cash, property and shares), countries and stock market sectors (such as financials, industrials or retailers).

Reduced dealing costs by pooling your money can help you make savings because you’re sharing the costs.

There is also less work for you, as the fund manager handles the buying, selling and collecting of dividends and income for you – but of course there are charges for this.

They also make the decisions about when to buy and sell assets.

Most pooled investment funds are actively managed. The fund manager is paid to research the market, so they can buy the assets that they think might give a good profit.

Depending on the fund’s objectives, the fund manager will aim to give you either better-than-average growth for your investment (beat the market) or to get steadier returns than would be achieved simply by tracking the markets.

You might prefer to track the market because if the index goes up, so will your fund value – but it will also fall in line with the index.

A ‘market index tracker’ follows the performance of all the shares in a particular market.

In the UK, the most commonly used market index is the FTSE 100 – a group of the 100 biggest companies based upon share value.