Investing in funds

Mutual funds are an investment that pools your money together with money from many other investors. Fund managers then invest the money in a wide range of investments, depending on the mutual fund’s objective, investment strategy, and policy.

Exchange-Traded Funds (ETF) is made up of a selection of assets such as stocks, commodities, bonds or a mix. Money from investors is pooled together to purchase these assets. As their name suggests, ETFs trade on stock exchanges.

ETFs tend to focus on a particular strategy, such as tracking a stock index (like the S&P 500), commodity (like gold), specific industry (like healthcare), geographic region (like Europe), or theme across multiple industries and regions (like ESG in emerging markets).

Like ETFs, Investment Trusts in the UK offer an easy option to diversify – and are not to be confused for the more well-known, but different meaning of "trusts". When buying into an Investment Trust, you're purchasing shares in an investment company. The pooled money from investors is used to then buy assets that are managed by the Investment Trust in line with its investment strategy.

Using the CMC Invest app you can place the buy and sell order for a Mutual Fund whenever you want, at any time. However, Mutual Funds are priced once a day and the dealing in Mutual Funds are different to ETFs. For more information read our article here.

Both options offer a simple way to diversify. But, while an ETF tracks the performance of a stock index, region, trend, or theme, the performance of an Investment Trust is based on how the portfolio of assets and its investment strategy are managed.

We don’t charge any fees or commission for investments in ETFs or Investment Trusts. The funds themselves usually have their own management fees. You can find details about these in the key information document (KID) for ETFs, or the key investor information document (KIID) for Investment Trusts. You’ll find a link to view the KID or KIID on the asset screen, and again on the order review screen.

Mutual Funds are available with our Plus and Premium plans. We don’t charge commission for individual deals in mutual funds, as with all investments available through our app.

The mutual funds themselves usually have their own management fees and you can find details about these in the key information document (KID) or the key investor information document (KIID). Links to these can be found when viewing a particular mutual fund, and again on the order review screen. The fund manager will deduct these fees from the assets within the fund and you can find details of these fees in the ‘Annual Cost Disclosure’, provided to you after each tax year. In rare cases, mutual funds also have an entry fee, exit fee or performance fee. You can find full details of these charges in the KID or KIID.

UK stamp duty and PTM levy don’t apply to mutual funds.

Actively managed mutual funds are run by a fund manager and team of analysts. They choose the fund’s investments, making changes as needed to keep the fund performing as well as possible. These funds aim to outperform broader markets and other competing funds, although there are no guarantees.

Passively managed mutual funds, also known as 'tracker funds', take a different approach. Rather than trying to do better than the market, they track an index representing it, so their performance is tied to the ups and downs of the market they're following. Both types have their advantages. With no active manager or analysts to pay for, passive funds usually have lower fees, but there’s also little potential for outperforming the market.