The Pros and Cons of OEICs

06-Aug-2007

There is a plethora of investment opportunities available to consumers, and there are inherent risks and advantages associated with each individual type of investment. It is crucial that you completely understand what you're putting your money into before you decide to invest. 

The pros and cons of OEICs are similar to that of investment trusts (since the two investments are similar except for the fact that investments trusts are closed funds and that they will only sell a set amount of shares). 

The main benefits of OEICs are:

• OEICs are managed funds so you will be able to leverage the wisdom and expertise of professional financial advisors.
• You will be able to diversify your investment since an OEIC invests in multiple companies and financial instruments.
• An OEIC is a simple way to build up and grow your savings since you can continue to put money into the fund on a monthly basis.
• OEICs are easy ways to invest since you do not have to actively manage your investments by buying/selling individual stocks (the OEIC management team does this for you).
• Since an OEIC is open ended there is no risk of the fund "closing" to new investors.  This allows you to find the best performing funds to invest in and to continue investing in them as long as you like.

The only possible disadvantage with OEICs is the management fee associated with the fund.  Ideally, the additional money you earn due to the fund being actively managed by professional investors should outweigh the management fees.  However, like any investment in stocks there is no guarantee that your investment will grow and there is always the risk that you will lose money. 

It is important for you to do your research on available OEICs and speak with professional adviser to find the fund that is right for you and fits with your investment strategy.