Understanding Investments

Investing directly into different assets, such as company shares, can become costly and difficult to manage. When you take out an investment, saving or pension product with us, you invest in a fund. By investing in a unit linked fund you pool together your contributions with contributions from other investors. Therefore, you share the costs and benefits of investing.

Investing in funds:

  • Focuses on the long-term – investing may help you reach bigger long term goals (typically five years or more) such as saving for your child’s university education or your retirement
  • Harder to access – when you invest your money in a fund, it’s typically not as easy to get your hands on it quickly compared to a savings account with a bank
  • Allows you get access to a range of different investments – We offer funds that invest in a single asset class such as company shares, government or corporate bonds, property or cash. We also offer funds that invest in a range of different asset classes. A fund manager oversees the fund and makes the decisions about which assets it should hold, in what quantities and when they should be bought and sold
  • Always involves risk – values can go down as well as up and you may lose some or all of the money you invest
  • Potential for a higher return – over the long term there is a chance your money will grow more, but remember you could lose all the money you invest

Why should I consider investing in a fund?

There are several benefits to investing in funds, rather than choosing individual assets or investments:

  • The Fund Manager picks investments for you
  • Less administration as the Fund Manager does it all for you
  • It may be cheaper than buying investments individually
  • More choice and, as part of a group of investors, access to a wider range of investment opportunities

What types of funds are available?

There are a few different types of funds available through Aviva:

  • Target return: In recent years, many investors have turned to target return funds. This is a way of investing that aims to generate positive returns in all market conditions. It uses investment techniques that can profit from both the ups and downs in markets and share prices. For many, target return investing has come to be seen as an integral part of their portfolio. Please note that there are no guarantees an target return fund will achieve its objective.
  • Multi-asset funds: These invest across a number of different asset types which may include equities, bonds, property, cash and alternatives. This gives you a greater degree of diversification than investing in a single asset class. Diversifying across a broad range of investment strategies, styles, sectors and regions can help cushion any shocks that come with investing in a single asset class. It also enhances the potential for investing in a better performing asset class, while spreading the risk of investing in lower performing asset classes. However, investors should remember that diversification does not fully protect you from market risk.
  • Cash: money placed on deposit at banks or in bank securities that pay a variable rate of interest. These types of funds offer the least risk, with little volatility, but offer the least potential for profit. They are largely influenced by the prevailing interest rate environment and inflation and charges may erode the returns they provide to you.
  • Bonds: Fixed interest or bond funds invest predominately in bonds that are issued by governments and/or companies as a way of borrowing money. Fixed interest funds invest across a range of different bonds. Effectively by investing in a fixed interest fund you are lending money to a variety of governments and/or companies. The loan will be repaid at a future date but in the meantime the governments and/or companies pay interest on the loans and this interest is added to the fund. Because these funds are loans to governments and/or companies they are typically less risky that investing in equities, but the long term returns are likely to be lower and there is a risk that the value of your investment could fall.
  • Equities: Equities are generally a higher risk investment. Equity funds invest across a range of different company shares, such as Apple or Nestle. Equity funds have the potential to make money in two ways: they can receive capital growth through increases in the share prices of the companies they invest in, and they can receive income in the form of dividends from the companies they invest in. They offer the greatest potential for both gains and losses as share prices, which are usually linked to the perceived value of a company, fluctuate daily with demand. This means that the value of your investment can go up or down, often quickly and often by significant amounts. That’s why equities are considered long-term investments and their performance is not guaranteed. Over the long-term, equities have historically demonstrated the strongest growth and the best protection against inflation compared to other asset classes and have outperformed property, cash and bonds. Some of our funds only invest in certain regions - others invest in companies all over the world.
  • Property: Commercial Property is often regarded as an attractive medium to long-term investment as it has historically offered less volatile returns than equities and outperformed bonds and cash. In a property fund, investors’ money is pooled to purchase a range of different properties. The investment return from property comes from capital growth and rental income. These funds may also have holdings in property related securities such as Real Estate Investment Trusts (REITS) and cash instruments. REITS are companies that sell like a stock on a major exchange and invest in real estate directly. Investing in REITs can offer a more liquid, dividend-paying means of participating in the real estate market than investing directly in property. There are broadly three sectors in the commercial property asset class. These include:
    • Offices: headquarters buildings, high rise blocks, business centres and science parks
    • Industrial: workshops, factories, warehouses and distribution centres
    • Retail: shops, showrooms, shopping centres, supermarkets and restaurants
Warning: The value of your investment may go down as well as up.
Warning: If you invest in this product you may lose some or all of the money you invest.
Warning: Past performance is not a reliable guide to future performance.
Warning: This product may be affected by changes in currency exchange rates.
Warning: Withdrawals and switches from funds investing directly or indirectly in property may be deferred for up to 6 months.
Warning: Withdrawals and switches from all other funds may be deferred for up to 3 months.

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