• Investors buy units in the fund.
• The price of the units goes up and down with the value of the fund.
• There is usually a difference between the buying and selling price of units on any one day e.g. 5%. This is called the bid/offer spread
• Normal minimum investment term: 5-10 years (more for life assurance savings plans due to the impact of charges in the early years).
• Guarantees: Usually none - this means that you may get back less than you paid in particularly if you encash your investment early.
• Risk: Some funds are riskier than others depending on the types of assets, the percentage invested in shares and the geographical spread of assets. Funds which offer higher potential returns are usually more risky.
• Charges: Some or all of the following charges may apply:

Initial charges:

Bid/offer spread (see above),

Allocation rate if less than 100%

On-going, regular charges:

Fund management charge - usually deducted from the fund before the unit price is set,

Policy fee - a set amount deducted from your policy each month.

Penalty charges:

Early encashment charges triggered if you withdraw your funds within a specified period - these can sometimes be on a sliding scale, reducing to zero as the term increases.

• Access: Many unit funds are open ended - (there is no set term) but a minimum investment term of 5-10 years is usually recommended. Most products allow partial encashments where some but not all units are encashed. Early encashment of units may be subject to penalty charges.
• Anything else? Be sure to check to check the impact of the charges on your investment over time. Make sure that you understand and accept the risk profile of the particular fund before you commit.

For more information please contact our sales team at 014097090 or info@orca.ie

With profit funds

You can use a lump sum or instalments to invest in a with-profit fund. The money in this type of fund is invested in the same type of assets as a unit fund: shares, property, bonds and cash (deposits). However, it is different from a unit fund because it is designed to be less volatile and aims to smooth out profits and losses over the investment term.

With-Profit Funds

• Any gains in the fund are added in the form of annual bonuses - but the level of these bonuses is not guaranteed and can be zero if returns are low. The person managing the fund (product provider) may decide to hold back some of the gains in order to provide for bonuses in years where the fund goes down in value. This is the theory behind the 'smoothing' concept. 
• Once an annual bonus is given it cannot be taken away unless you cash in your funds before a set time. See Access. 
• A final or terminal bonus may be added when the investment is encashed on a cartain date or dates - but again, this is not guaranteed. 
• Minimum recommended investment term: 7-10 years.
• Guarantees: Vary from product to product - check carefully and compare with other products. Bonus rates are rarely if ever guaranteed. 
• Risk: You may get back less than you paid in if you encash your policy outside of the date or dates the life company provides a guarantee. There is a capital risk in some with-profits funds - be sure to check.

Charges: Some or all of the following charges may apply:

Initial charges: bid/offer spread (see above), allocation rate if less than 100% (this is the % of your money used to buy units;

On-going, regular charges: fund management charge - usually deducted from the fund before the unit price is set, policy fee - typically e3.50 per month;

Penalty charges: early encashment charges triggered if you withdraw your funds within a specified period - these can sometimes be on a sliding scale, reducing to zero as the term increases.

• Access: With-profit funds are, generally speaking, open-ended. You may have a guarantee that an encashment penalty will not be applied on a certain date in the future - for example on the 10th anniversary. If you encash at any other time you may incur a potentially significant reduction called a Market Value Reduction (MVR). An MVR is most likely to be applied when the value of the with-profit fund is above the 'true' market trend. (See point A in the above graph.) 
• Anything else? Check to see if the product offers a date or dates on which the Market Value Reduction (MVR) can not be applied to unit encashments; encashments outside these dates are not guaranteed. Many investors find that they need to cash in early - so be sure a with-profit is suitable for you before you commit.

For more information please contact our sales team at 014097090 or info@orca.ie