So, you know all about Dodl, you’re fully clued-up on the charges and now you’ve chosen your first investment account. ✅✅✅ Next step? Choosing you investments and building your portfolio!!
But before you do, it makes a lot of sense to have a basic understanding of the different types of investments you could choose and how they differ from each other. We’ll cover this here, as well as how each investment type fits into the Dodl investment range. This knowledge can help you make your investment decisions clearly and confidently. Get ready to supercharge your investment knowledge! 🚀
Let’s start with the basics: what are investments? 🤔
Investments are different things you can buy to *hopefully* make you money – either a profit when you sell them and/or to produce regular income for you while you hold them. That’s the idea, but of course it doesn’t always work out like that. ❗ The value of investments (and any income they generate) can go down as well as up and you could get back less than you originally paid for them.
Many, many different things can be considered investments: art, vintage clothing, property… the list is huuuge. You can buy and sell an investment – or ‘trade’ it – on a market. For example, you can trade expensive pieces of art on...you guessed it, the art market.
Investment apps, like Dodl, offer investments which trade easily on the stock market and can be held electronically in an investment account. When you buy investments using an investment app you don’t get a certificate or letter confirming your purchase “like in the good ol’ days”, instead you’ll get a digital note confirming all the details. You’ll then see it appear in your investment account – where you can monitor how your investment changes in value over time. Much easier to keep track of and far fewer trees harmed in the process! 🌳
Investments which trade easily like this online, and are available to any investor looking for long-term rewards (no matter previous experience!), include shares, funds, exchange traded funds and bonds – and all of these are accessible with Dodl. So let’s look at each of these main types of investments in closer detail. 🔎
The main types of investments
Shares, funds, exchange traded funds and bonds – what they are and how do they differ?? Just these four to explore because they’re the ones which’ll crop up with Dodl. Though they’re common and popular types of investments, they still carry risk and returns aren’t guaranteed. There are other types of investments out there, usually higher risk and not an option with Dodl (so we won’t be covering them here).
Shares
What are they?
Shares represent a portion of ownership of a company – a slice of the company pie if you will. 🍰 When you buy shares which trade on a stock market, you’re buying a portion of a publicly listed company.
Buying shares in a company makes you a part owner of it. Depending on how well the company does, the value of your shares could go up or down, giving you either a profit or a loss when you sell them. And while you hold the shares you might also receive a portion of the company’s profits in payments known as ‘dividends’.
You can invest in companies by buying shares in them directly, or you can invest in lots of different companies at the same time by investing in funds or exchange traded funds.
With Dodl you can buy shares directly in some of the biggest names in the UK and US, but make sure you research the company first. Or you have the option of accessing shares, from all over the world, through the range of funds and exchange traded funds available. 🌏
Funds
What are they?
When you invest in a fund, your money goes into a pot with lots of other investors’ money. A professional fund manager uses that pot of money to buy lots of different investments (usually around 50-100 shares, bonds or other ‘underlying investments’), which match the fund’s goals. In exchange for managing the fund, they’ll charge you a % of your investment in it.
Funds come in all different shapes and sizes and they can sometimes get a bit confusing, so it’s important to understand the type of fund you’re investing in. Here are some fund-facts to look out for:
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What is the fund aiming for? 🏹
Read its description and its key investor information (see more on this below) and, handily, there’s usually a clue in the name of the fund. For example, AJ Bell responsible growth: it aims to grow your money over the long term in a responsible way – so it invests your money in more ethical companies and other underlying investments but growing your money is still the main aim.
Some funds may invest in companies which pay dividends and then pass these onto investors as income from the fund. Unsurprisingly, these funds are often called ‘income’ funds and will usually have that in their name too.
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What are its underlying investments? 🧐
Again, the description and key investor info will show you this, and you can also see the types of underlying investments (e.g. shares, bonds, cash etc.) by proportion of the fund. Some funds invest in a broad range of investments from lots of different industries and countries and some stick to one particular theme e.g., technology, health or the USA.
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What level of risk is it? ⚠
It’s really important you’re comfortable with how much risk you’re putting your money at by investing in the fund, so be sure to check this stat. As always though, higher risk = potentially higher rewards over the long term.
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What are its charges? 👀
All funds have an ongoing charge, given as a % of your investment e.g. 0.20%. It covers the day-to-day costs of running and managing the fund. It’s deducted straight out of your investment by the fund manager on an ongoing basis, so you don’t need to do anything to pay it.
On top of the ongoing charge is the fund’s transaction costs (basically the fund manager’s costs to buy/sell investments in the fund). It’s shown as a % of your investment in the fund, like the ongoing charge is and you’ll be able to see both in the fund’s key investor information.
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Key investor information document 📄
Or ‘KIID’ if you’re looking to save yourself a bit of typing (which I am!). This document includes all the fund’s most important bits. You should give it a good ol’ read to make sure you understand it, and so you can compare it to other funds which take your fancy. All funds available with Dodl have one of these docs because they’re required by law and are created to help you make your investment decisions. 🙌
With Dodl you can invest in funds run by AJ Bell or themed funds from other well-known fund managers.
Exchange traded funds
What are they?
Exchange traded funds (or ‘ETFs’ for short) are designed to track the performance of a particular index (e.g. FTSE 100) without buying all of the companies or investments which make it up. When the index goes up or down in value, as will the price of the ETF. 📈
Though they give you access to a range of underlying investments (whatever makes up the index it’s tracking) like regular funds do, they actually behave more like shares because they’re ‘exchange traded’. In other words they’re bought and sold on a stock exchange.
And just like regular funds they have a KIID and an ongoing charge, though it is usually lower because there isn’t someone actively managing ETFs.
With Dodl you can invest in ETFs which track particular themes like parts of the world, particular industries (or ‘sectors’) and responsible investments. 🌎🧬🌲
Bonds
What are they?
Bonds are like an IOU from a company or government – when you buy the bond, you’re effectively lending them money. In return, they agree to pay you regular interest every year until the agreed end date of the loan, at which point they’ll pay you back the original amount.
Generally lower risk than shares, but some are riskier than others depending on who issues the bond (i.e. who you’re loaning your money to). Bonds issued by the government are called Gilts and tend to be safer than bonds issued by companies. Though they may not be the coolest kid in the investment playground, bonds could be a steadying addition to a share-heavy investment portfolio. ✔
Like shares, you can buy bonds directly or indirectly invest in them through funds and ETFs. Dodl doesn’t offer the option to directly buy bonds, but you can invest in them through a number of different funds which are available in the themed investment range.
Introducing the Dodl investment range! ✨
But how do all of these investment types fit into the range of investments available with Dodl? Well, let’s see…👀
First off, the Dodl range of investments can be split into three groups: AJ Bell funds, themed investments and shares. The AJ Bell funds are (you guessed it) funds, each with different aims, risk level and investments which make them up. The themed investments include both funds and a few ETFs, with underlying investments in shares and bonds matching the fund/ETF’s theme. And finally there’s shares, giving you the option to directly invest in some of the biggest companies in the UK and US. Check out more info on each. 👇
AJ Bell funds
What are they?
A set of seven different diverse investment portfolios, ready-made by the experts at AJ Bell to make investing as simple as possible. Just choose the risk level which suits you, and whether you’re after something more responsible, then you’re away!
Who are they for?
✅ New to investing and not quite sure where to start
✅ Just want to leave your investments to the experts
✅ Want a ready-made portfolio matching the risk you’re happy to take
Not sure what’s meant by ‘risk’? Learn more about it in the Why invest learn series.
Themed investments
What are they?
Build an investment portfolio with funds and/or exchange trade funds which reflect your values. Invest in the trends you believe in, including specific sectors and regions, or responsible investments. And because they’re brought to you by some of the biggest names in the investment world, so you’re still benefitting from some expertise.
Who are they for?
✅ Looking for particular themes, like global regions or responsible investments
✅ Happy to build your own portfolio but still want to invest in funds
✅ Investing around your interests and values
If you’re liking this option, just remember, it’s important to build your portfolio from a diverse range of investments spanning different themes.
Shares
What are they?
Own a portion of a big-name brand by investing directly in a company from the UK or US. There are 80 different companies to choose from, covering a wide range of sectors.
Who are they for?
✅ Feeling confident enough to build your own portfolio of investments
✅ Want to invest in individual companies and know the risks of this
✅ Happy to do your own research when choosing the ones for you
Still there?! 😅
Sorry!! This was a bit of a beast of an article but it is some of the most important stuff to get to grips with early doors. And hopefully you’re now all clued-up on what the different types of investments are and how you can invest in them with Dodl.
All this info is here to help you lay the groundwork to building your very own investment portfolio. Read on to learn more about how you can do this or browse the Dodl investment range to get started now.
🔔 Remember investing carries risk and nothing in this article should be taken as advice - Dodl doesn't give advice, but we do hope the info is helpful!