When I was growing up I loved the Argos catalogue. If you missed out on this wondrous thing it’s a book of home and leisure products from a popular UK retailer and is currently in the homes of around two thirds of the UK households.
I don’t have one in my house at the moment but at the age of perhaps 9 or 10 it was revered as a bible.
It would not be unusual to find me lying on my bed eagerly flicking through the catalogue pages, reading every last description and staring at the pictures: Super-soaker water guns, digital watches. Remote control cars. You could even buy flying lessons…but alas the minimum age of 16 seemed eons away at that time. I could spend hours looking at all the cool toys and gadgets laid out on the pages.
Despite my obsession with Argos catalogues in my childhood I moved on from catalogue window shopping!
Little did I realise though that I would need to study a new type of catalogue with the same intensity as the Argos catalogues of my youth:
The Investment Prospectus!
Investment prospectuses is like a shopping catalogue for investors. They are useful because they give you some insight into ‘funds’ or ‘unit trusts’, the collective investments that pools money from many investors and invests it in variety of things.
Investing in Unit Trusts
For most people, when they think about stock market investing, they think about buying individual shares in popular companies. However there’s more to investing than that. In fact, as part of Magical Penny’s introduction to investing series I wrote a popular article ‘Five Reasons Not To Invest In Single Shares’. But if individual shares are not the way to go then what is? One answer is Unit Trusts (or mutual funds in the US and elsewhere) because they provide you with instant diversification, spreading your ‘eggs’ around in lots of different ‘baskets’.
Unit trusts make it easy to buy collections of lots of different investments like company stock, commodities (stuff -oil, wood, cocoa etc), bonds (company debt), cash or all of the above. You don’t actually own all these investments directly but instead a unit trust packages up all the different things into a single investment that you can simply buy a ‘unit’ of.
But don’t trust the marketing
If you watched Monday’s video, you’ll know that whilst there are many benefits to investing in unit trusts, the information presented in investment prospectuses selling the investments can be misleading.
But there is a solution to get closer to the truth and, for me, it revolutionised how I researched investments. It also made unit trusts much easier to understand and compare.
A fund supermarket is a relatively modern invention that allows you to compare hundreds of different unit trusts from lots of different companies in one online site.
Think of it as like an Argos catalogue combined with a hundreds of other catalogues….oooh I just got chills!
Like in a real supermarket where you can pick up two different items and compare them next to one another, a fund supermarket allows you to directly compare different investments even if they are offered by different investment companies.
In the next few posts Magical Penny will be going into much more detail about fund supermarkets and showing you how to invest but I thought it worthwhile to at least introduce a solution to the problem of confusing and misleading investment prospectuses outlined in the video.
So consider yourself reassured!
There is a way to invest that’s easy to understand and it doesn’t take much time either. And I look forward to sharing with you how to do it! I hope you’ll continue on this journey of discovery into the world of investing.