Tom
Head of Content

Investment basics

Whether you're an investment beginner, or want a quick refresher, here's a speed run through of the fundamentals of investing.

What is an investment platform?

An investment platform is industry jargon for website, app, or even telephone/in-person based service (if we’re to go retro), that enables ordinary members of the public (known as ‘retail investors’) to access investment funds. 

Investment platforms typically charge a small fee for their services known as a platform fee (we explain more in our eligibility and costs guide). 

'Chip Investments' is an investment platform, this means we don’t manage the funds ourselves, we have created a user friendly interface where you can easily move money in and out of BlackRock’s investment funds, monitor your funds’ performance, and keep track of statements.

What is an investment account?

Within our platform you have an ‘investment account’, either a tax efficient ISA or a General Investment Account (GIA), read more about this in our ISAs explained guide.

We work with a company called Seccl to provide these accounts. Seccl acts as the ‘custodian’ and provides the behind the scenes technology for your investment account (read more about them here). However, you won’t need to liaise with them or pay any fees, and Chip’s support team can handle all your queries.

What is an investment fund? 

An investment fund is a quick and low cost way for investors to diversify their portfolio.

A fund is an investment that pools together money from lots of individuals, it is run by a fund manager (in our case BlackRock) who invests the money in a wide range of assets (see ‘What are assets’ below for more on this).

When you put your money in a fund you buy ‘units’, which represent a portion of the holdings of a fund (see ‘what is a unit’ below), and when you want to take your money out you need to sell units. 

How are investment funds different from directly investing in stocks, shares and other assets?

Investing in funds means your money is spread across multiple assets. As some investments will perform better and some worse over time, diversifying will, in theory, help spread the risk and smooth returns over time.

Investing in a fund is also preferred by investors who want to save time (not reviewing and pricing individual stocks) and money (not paying lots of commissions and fees to invest globally).

What are investments/assets? 

An investment is any asset purchased with the expectation that it will increase in value, and be sold at a later date for a profit. 

Assets most commonly used for investments are:

  • Stocks and shares (known as equities)
  • Corporate Bonds
  • Government Bonds (also known as Gilts)
  • Property
  • Commodities (e.g. gold, oil, steel, lumber etc… ) 

However, investment funds generally focus on equities and bonds. The BlackRock consensus fund range focuses on equities and bonds across the  globe.

Though specialist funds do exist that invest in all kinds of assets, we may add some of these at a later date, but we will explain these in more detail at that time.

What are bonds and equities?

Stocks and shares are commonly called equities, these give you partial ownership in a publicly traded company (though can also include limited companies too), they’re called equities because by owning a share in a company you have an “equity stake”. 

Bonds are a loan from you to a company or government, and generally offer interest, dividends, or a guaranteed future valuation in the case of some government bonds. 

The biggest difference between equities and bonds is how they generate profit: stocks need to appreciate in value, while most bonds pay fixed interest over time. However, you can also sometimes earn ‘dividends’ through equities, this is where companies either issue cash or additional stocks to their shareholders, if the company has performed well.

Equities are historically more volatile in price, meaning they will increase in value faster but can also quickly lose value. Bonds are generally considered to be more stable and lower risk assets to invest in.

What is a ‘unit’? 

An investment fund is made up of 'units', so if you want to invest, you'll need to buy units – and these come at a cost which varies from day to day.

For example if you want to invest £1,000 in a fund; if each fund unit costs £2, you can buy 500 units. Six months later, if the fund units increase in value to £2.50, your investment is now worth £1,250.

How are fund units priced?

The unit price is worked out by dividing the total value of investments in the fund by the number of units in the fund. For example, if there were 10,000 units held in a fund worth £20,000, then the price of each unit would be (£20,000 divided by 10,000) = £2 (or 200 pence) a unit.

What is a Key Investor Information Document (KIID)?

Fund managers provide an information sheet called a KIID (Key Investor Information Document) which includes all the key facts about a fund. 

It describes what the fund does, the investment risk, associated charges and performance to help you compare different funds and assess whether that particular investment is right for you. It comes in a standardised format, set out by European regulations.

Here is an example of the “BlackRock Adventurous” KIID that will be available in the Chip app.

What is a Key Features Document?

A key facts document outlines the features of each product type, ISA and GIA. These are presented to you when you create your investment account with Chip and can also be found on our website. 

We are an appointed representative of P1 Investment Management, who are accountable for this Key Features Document (read more about them in our legal details guide).

Read more about investments


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