What fund ratings can’t tell you

What fund ratings can’t tell you

If you don’t know where to invest your money, just a little time spent on the internet will provide you with plenty of investment material to trawl through. And, while it might be a good initial source, the sheer quantity available can be daunting and won’t necessarily give you the answers you need when trying to choose investments. So, how do you know which information to use and which to avoid at all costs? And, most importantly, how do you know if an investment is not just right, but the right one for you?

The fund universe

If you’re investing a sum of money, there’s a good chance you’ll be putting at least some of it into a fund; whether you choose a fund directly or invest in a portfolio that uses a number of funds. There are thousands of different funds available to investors, with a multitude of variables, and knowing which ones to pick can be an impossible task.

To make things easier, lots of companies compile ‘best buy’ lists and ranking systems so you can whittle the thousands down. But while this might seem like a very helpful exercise, it isn’t always the helping hand it initially seems.

So what’s the problem?

The problem is that we’re not all alike, and we don’t all have the same financial circumstances. The right fund for one person may well be the wrong one for someone else. Or investing might just not be appropriate at all. Everyone is different and it’s important that any portfolio is suitable for each individual’s circumstances and preferences.

A certain fund could rank as the best European equity fund on the market, but if you’re circumstances don’t warrant investing money in European equity then it’s quite redundant. And it’s precisely this kind of questions that fund ratings and best buy tables can’t answer.

Essentially, with funds – and investing in general – it comes down to risk, and how much you can and need to take. If you already hold investments, adding a new fund could have the impact of diversifying your portfolio further – and thus negating risk – or it could be ‘another egg in the same basket’ scenario and enhance your overall risk level.

Managed for you

Seeking advice and having your portfolio managed by an investment team can mean a couple of things – you save yourself a lot of time and you gain a lot of investment expertise. Your investments are chosen for you, and done so with risk levels and performance in mind.


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Any news and/or views expressed within this article are intended as general information only and should not be viewed as a form of personal recommendation. This article is not directed to, or intended for distribution or use in, any jurisdiction where such distribution would be prohibited. To the extent permitted by law, Wealth Horizon accepts no duty of care or liability for loss occasioned to any person acting or refraining from acting as a result of any material contained within this article. Where past performance is shown, this should not be taken as a guide to future returns. Investment in the stock market is not a suitable place for short term money. The value of investments and associated income may go down as well as up and you may not get back the full amount invested.

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Investment risk: Investment in the stock market is not a suitable place for short term money and you may not get back what you put in. All investment carries risk and it is important you understand this, if you are in any doubt about whether an investment is suitable for you, please contact us. Investment in the stock market and any income derived from it, may go down as well as up.

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