What is a mutual fund

The Idea Behind Pooling Money

A mutual fund gathers money from many people and invests that money together in a defined mix of assets, such as bonds, shares or cash instruments. Instead of each saver buying assets separately, the fund buys them as a single pool. The mix is set out in the fund's objective and rules, so the pool is not a random collection of holdings but a stated combination that the asset manager maintains over time.

When you put money into the fund, you do not receive a share of each bond or share held by the pool. You receive units of the fund. Those units represent your portion of the pool as a whole, and the fund's assets are owned by the pool rather than by any single investor directly. When you take money out, your units are redeemed and you receive the value that attaches to them at that point.

The value of a single unit is the net asset value. It is worked out by taking the total value of the fund's assets, subtracting its liabilities, and dividing by the number of units in issue. Because the assets held by the fund rise and fall in value, the net asset value moves as well. Most funds sold to everyday savers are open-end funds: the fund can issue new units when more people invest and cancel units when people redeem, so the number of units is not fixed.

Pooled cash becomes a defined mix of assets chosen within the fund's stated objective.

You hold units of the pool, not the underlying assets themselves.

Unit value is the net asset value, which changes with the value of the fund's holdings.

Reading the Figures the Engine Prints

On this page the engine splits every figure into its own block: a rate sits apart from the date beside it, and each provider name appears as a separate label rather than inside a sentence. Read each block as a single piece of information about a specific offer, not as a description of the fund itself. A rate block shows what that provider quoted for that entry; a date block shows when the figure was recorded; a name block tells you who supplied it. Because the blocks are generated separately, they can fall out of line with each other, so check that the name, the date and the rate you are reading belong to the same row before you compare anything.

The calculators on this page take the figures you enter and return a computed result. Treat that output as arithmetic, not as a forecast: it applies the inputs you gave it and nothing more. If you change a date or a rate, the result changes with it, which shows how sensitive the output is to your own assumptions. The engine does not know your circumstances, and a computed figure carries no promise about what a fund will return or what a provider will pay you.

Match each rate to its own date and provider name before drawing any comparison.

Note which inputs you supplied to a calculator and which the engine filled in.

Re-run a calculator with different inputs to see how the output moves.

Several things are not shown in these blocks: the fund's objective, its holdings, its fee structure and how often its net asset value is struck. Those details sit in the fund's own documents. When you speak to a provider, confirm the basis of each quoted figure, the date it refers to, and what the calculator assumes.

Net Asset Value and Unit Pricing in Practice

Unit value is derived from a simple relationship: take the total value of everything the fund holds, subtract what the fund owes, and divide the remainder by the number of units in issue. The result is the net asset value of a single unit. Because the top and bottom of that calculation both change, the figure is a snapshot rather than a fixed attribute of the fund. Asset prices move with the market, liabilities can rise or fall, and the unit count itself can change, so a unit value quoted on different days reflects different conditions rather than a steady baseline.

What makes the unit value move is the repricing of the underlying holdings. A fund holding bonds will see its unit value respond to shifts in bond prices and accrued income; a fund holding shares will respond to equity prices; a fund holding cash instruments will move less but still move. Ongoing charges deducted from the fund reduce the asset side over time, which is why costs and unit value are linked rather than separate topics. A saver watching a unit value across a period is watching the combined effect of market movement and deductions, not a single cause.

Open-end issuance and redemption matter for the saver because the number of units is not fixed. When new money enters, the fund issues units; when savers exit, units are cancelled. This means the unit value is not diluted by new entrants in the way a fixed pool might be, and exiting savers receive the value of their units at the time of redemption rather than a share of a static pool. The practical point to check with the provider is when the unit value is struck, how often it is calculated, and which day's figure applies to a purchase or redemption instruction.

What the Tables Do Not Show

A side-by-side view of figures cannot carry the ongoing charge that is taken from the fund itself. That charge is deducted inside the pool before the net asset value is struck, so it never appears as a line the reader pays. Two funds showing similar unit values can therefore differ in what is quietly removed each period. The fund's documents set out what is charged and when, and the engine on this page does not reproduce them.

Loads sit outside the unit value and depend on the route through which units are bought or sold. A figure printed here cannot tell you whether a charge applies on entry, on exit, on both, or on neither, nor how it is calculated. Valuation timing is another gap: the net asset value is struck at a point set by the fund, while the figure on this page is a snapshot taken at whatever moment the engine ran. Between the two, the assets held by the fund may have moved. Custody arrangements are not visible in any table either — who holds the assets, and how they are separated from the manager's own money, is described in the fund's documents rather than in a column of figures.

Side-by-side figures also cannot show how a fund's stated objective constrains what the manager may buy, how often the portfolio is turned over, or what happens to unit holders when many redeem at once. Check with the provider:

the ongoing charge and any load, and when each is taken;

the valuation point and how often units are priced;

who acts as custodian and trustee, and how assets are segregated;

the redemption terms, including any notice period.

Questions to Put to the Provider

Before you rely on any printed comparison, confirm with the provider how the fund is set up and who stands behind each role. Establish the name of the asset manager, the custodian and the trustee, and request the fund’s current documents so you can read the stated objective and rules yourself. Confirm whether the fund is open-end and how units are issued and redeemed, and clarify the dealing cut-off and settlement arrangements that apply when you put money in or take it out.

Go through the charges line by line. Establish which costs are deducted from the fund on an ongoing basis and which apply when you buy or sell units, and confirm when each charge is taken. Enquire how often the net asset value is worked out and where it is published, and how the provider reports changes in the value of the assets held. Confirm what information you will receive after investing and how often it is sent.

Put these points to the provider directly:

Which body regulates the fund, and how can you verify its registration independently?

What happens to your units if the manager runs into difficulties, and how does the custodian’s separate holding protect the fund’s assets?

How are complaints handled, and who oversees the manager when something goes wrong?

What exit terms apply, and how long a redemption takes to be processed and paid?

Keep written answers. If any point is unclear or refused, treat that as a reason to look further before relying on the comparison.