Investing in funds

Frequently asked questions

• What is the difference between income and accumulation units?

  The type of unit you hold determines how any income generated from the fund's underlying investments is treated.

  With income units, income is paid out to fund holders as cash. This could provide the investor with an income stream or the cash could be reinvested to buy additional units.

  With accumulation units income is retained within the fund and reinvested, increasing the price of the units. Generally, for investors who wish to reinvest income, accumulation units offer a more convenient and cost-effective way of doing so.

• What is the difference between 'inclusive' and 'unbundled' funds?

  In the past most investors who held funds, such as unit trusts and OEICs, paid a single ongoing charge to the manager of their chosen funds. This charge often included an element of commission which the fund manager shared with brokers, such as Hargreaves Lansdown, to help pay for their service. We call these funds 'inclusive' funds.

  Changes to FCA rules now mean that when investors purchase a fund any commission must be rebated to the investor. Fund management groups have launched versions of their funds with lower ongoing charges, which do not include any commission. We call these funds 'unbundled' funds.

• How do I buy funds?

  You can buy funds online, over the telephone or by post. Please ensure you have read the fund's Key Investor Information Document (KIID) or Key Features first which is available from the individual fund factsheets on the website.

  Online: If you're registered for online access, simply log in and select the relevant account, such as the HL ISA or SIPP and click the ‘Deal Now’ button. Search for your chosen fund investment and continue to the confirmation page.

  If you're not already registered, you can set up online access by selecting the ‘Register’ tab at the top right of the screen.

  Telephone: Provided you have set up your security details, you can call our stockbrokers on 0117 980 9800 Monday - Friday: 8am - 8pm.

  Post: Download a dealing form from our Useful forms section and return it to: Hargreaves Lansdown, One College Square South, Anchor Road, Bristol, BS1 5HL.

  Hargreaves Lansdown do not charge a dealing commission to buy or sell funds.

• How are funds priced?

  Funds fall into two main categories – unit trusts and open-ended investment companies (OEICs). They share many characteristics, for example both are normally priced once per day. The price is based on the net asset value (NAV) of the underlying holdings divided by the number of units or shares in issue. Dealing for both types of fund takes place on a forward-pricing basis, which means that a buy or sell instruction is placed at the next available valuation point. For this reason investors do not know the price they will pay or receive until after the deal is completed.

  Unit trusts and OEICs are both ‘open-ended’, which, normally speaking, means that if more investors are buying units than selling, the manager ‘creates’ new units. If the opposite is true, the manager ‘cancels’ units in the fund.

  Unit trusts and OEICs can differ in the way prices are displayed, and the way charges and discounts operate.

  Guide to Fund Prices, Savings and Yields