Deciding what specific funds to add to your investment portfolio can be likened to going to get your weekly grocery from the supermarket. Let’s say you want to buy orange juice for breakfast. You go to any of several supermarkets and you are typically presented with a plethora of options to choose from. All with scintillating glossy images of succulent looking oranges split open with nectar running down. You are also often presented with supermarket brands of different types, international brands, organic, all natural and no preservatives, fresh, partially fresh, partially preserved, you name it. If you’re not careful, you could end up buying lemon juice thinking its 100% orange juice. You soon feel the bite of the sour taste when you attempt to drink it like your normal orange juice. But alas, you are shocked to reality because it is not the typical sweet orange taste you expected. How can you prevent this?
Deciding which fund to select is far more complicated than buying orange juice for breakfast. But the decision process is somehow similar. You go for what you’ve always known from family and friends, you go for what you’ve had before and liked, you ask around, or you got for what you’ve seen people enjoying – perhaps on TV. These are various filters you can use to whittle the plethora of options down to the one you end up buying.
The open market is full of thousands of investment funds to choose from. You can do your due diligence and research the various funds, you could also consult an adviser. Or rather than jumping from one supermarket to the other, you could just focus on one. That supermarket of choice can be likened to a bucket of funds pre-selected by an expert fund manager. These can contain a mix of 20, 30, 50, 100, etc. funds to choose from.
From your investment profile above, you should already know what you would like to invest in. Investment funds are normally named according to the kinds of assets they invest in and the specific goals they are designed to achieve. They also often tend to be branded so they will normally bear the name of the fund manager or sponsor with a few other distinguishing features like location, investment grade, etc. For instance, you could see
- HetoGrow EMEA Treasury High Yield income fund – HetoGrow is the brand name or fund sponsor / manager, EMEA is the location the fund invests in, treasury high yield is the asset type it invests in, and the fact that it has income fund in the name tells you it is a low risk fund that pays regular income.
- HetoGrow APAC Growth Fund – this would be a growth fund that specialises in investments in the Asia Pacific region. Note that this regional fund will likely be more risk diversified compared to a fund that invests only in just one country within that region.
- HetoGrow Global Equity Fund | accumulation – the name indicates that this fund would specialise in equity investments anywhere in the world. By nature, equity tends to be risky and stock market prices can be volatile. However, the risk is spread by investing in different markets all over the world’s leading capital markets.
- HetoGrow Africa
Speciality fund | Accumulation USD – the name indicates that this is a US Dollar denominated fund that invests in specialty assets / projects in Africa with a long term view, as indicated by the accumulation appendage of the name.
- HetoGrow UK Mid 250 Income Fund – indicates that this fund invests in the FTSE 250 (footsie 250) listed companies on the London Stock Exchange. This is the second category after the top 100 companies listed on the stock exchange. This category if often referred to as mid-caps by analysts. The index can be highly volatile due to geo-political and other external factors. Expectedly, it tanked following the Brexit referendum.
- HetoGrow FT100 Fund | GBP Acc – this would focus on FTSE 100, a collection of the biggest 100 companies listed on the UK stock exchange. These companies are often called “blue-chip” and they can be more resilient to market volatility compared to FTSE 250. The name also indicates that this is a GBP denominated accumulation fund so it has a long term investment horizon.
Whatever the fund you select, you should be able to get more specific information from the fund summary or full information pack. And having selected your funds based on your investment profile, you further have to instruct your fund manager how much of your money to invest in each fund.