Friday, August 22, 2008

Taking The Plunge !

You have decided that you want to invest a lump sum and you are happy that you will not need to call on these funds for a good number of years to come. You understand that the value of these unit-linked funds can fall as well as rise. You are aware that you should diversify your investment so that all your eggs are not in the one basket, just in case one particular asset class takes a nose dive.

The problem you are faced with is in deciding which product to invest in as there is a multitude to choose from. The following are some of the factors that you should consider, before you take the plunge.

Investment Style

You can choose ‘Active’ or ‘Passive’ management for your investment. Some companies will allow you to combine both styles under the same product. ’Active’ refers to the involvement of a fund manager in the selection of assets that make up the fund. With a ‘Passive’ fund, your investment tracks the performance of an ‘Index’.

Much has been written about these two investment styles. The determining factor is in whether you believe a fund manager can add value to your investment through his or her decisions. Active management tends to be more expensive so also bear that in mind.


Does the product allow you to spread your investment by region, sector, and asset class or investment style?


Does your investment permit you to redirect or switch funds easily? Does it allow you to add to your existing investment, if needs be? Can you make partial withdrawals without penalty and where can you get the value of your investment at any particular moment in time? Are there any restrictions on how much money must remain in the investment to keep it ‘live’?


How much of your money is invested in the product from day one? What are the management charges for each of the funds you are interested in? How much commission is paid and can this be negotiated? Are there early encashment charges that would penalise you in the event of a partial or full withdrawal of your funds? What charges apply to switching or redirecting funds? Are there any incentives for you, in the form of extra allocations, for large investments?

If you have all the answers to these questions and you are happy that the product offers good value and is suitable for its intended purpose then you should be able to take the plunge, with the parachute.

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