Managed funds

Managed funds do not track a particular index. The fund manager invests in different companies that are carefully selected according to the fund's brief. For example one fund might invest especially in European smaller companies whilst another might focus on larger companies based in North America.

The fund management company's analysts assess the suitability of individual stocks for their particular fund. Via their expertise your money could be invested in 30-100 companies at any one point in time without you having to worry about making decisions about individual shares yourself.

Tracker funds are not actively managed but attempt to track the movement of a stockmarket index. This means that your investment reflects proportionately the companies listed in a particular index - the FTSE 100, for example, and the stockmarket dictates how well your investment does.

You can get a rough feel for how your investment is performing by reading reports on the financial markets.