When choosing funds, it’s important that you understand what your investment needs are. For example you should think about:

• What do you need from your investment? How much do you need your funds to grow to meet your savings goals or retirement income needs? The answer to this may make you think about taking more risk than you're comfortable with in order to achieve your goals. Or, it may make you realise you're on track and could be a little more cautious.

• How do you feel about investment risk? All investments involve some element of risk. They're quite unlike a bank account in that respect. You have to find a balance that suits your goals and still lets you sleep at night. Generally speaking, riskier investments like equities (company shares) have better long-term growth potential, but they're also the most likely to suffer the biggest falls, especially over the short term. By the same token, investments like cash are unlikely to grow as much, and may even be worth less over the long term because of inflation.

• How long do you have to invest? This is an important question. If you're saving for retirement and have lots of time to invest, then you can possibly afford to take greater risk with your money as you have time to ride out the short-term falls. But, if you need your money soon (within five years) you may need to be more cautious as you don't want to be forced to cash in your savings when markets are down.

These are just some of the main things you should think about when choosing funds.

Once you know your investment needs, the next step is to find the funds that best match those needs. The best way to achieve a balance between your investment goals and risk is to 'diversify'. This means investing in different asset classes (such as company shares, bonds, commercial property and cash). You can also invest in different countries and regions and different industries. This means that you're not so reliant on the success of just one type of investment.

Fund factsheets and Key Investor Information Documents explain how each fund works and are a good source of information. Among other things they will tell you:

• What the fund aims to do and how it is managed
• What types of investments it holds
• How it has performed in the past – although please remember that past performance is no guide to future performance
• How much the fund costs
• What its risk rating is

It's important that you read these documents before taking a decision. 

If you’re at all unsure about what to invest in, please seek advice or guidance.

It’s important to remember that, whatever investment you choose, your money is at risk. The value of an investment can fall as well as rise and isn't guaranteed. You may get back less than the amount invested.