A collective investment is where a fund manager pools your money with that of other investors to purchase securities. Professional fund managers then use this capital sum to build up a large actively managed portfolio of investments. This approach enables you, indirectly, to hold a wide range of stocks and shares in a way which would not be practical for an individual investor, whilst minimising the effects on your capital of fluctuations in individual share values.
Depending on the fund, they offer diversified exposure to domestic and international stock markets and other investments with the benefit of having funds managed by an industry expert (the Fund Manager).
Investment Trusts, Unit Trusts, OEICs and Exchange Traded Funds (ETFs) are all examples of collective investments.
While the risk is spread the value of funds can go down as well as up.