Choosing your funds

Legal & General rate the funds in terms of the risk they believe they present to your investment amount assuming that you invest for at least 5 years. The funds are spread across 4 risk ratings:

Your attitude to risk

To find out which risk category might be most relevant to you, simply answer the 12 questions below.

Or you can read the Risk & Reward information.

Depending on whether you are looking for income or growth from your investment may determine whether you choose income or accumulation units or shares for your portfolio.

• Income units or shares - this is where income generated from your chosen fund(s) will be paid direct to your bank or building society account.
• Accumulation units or shares - this is a unit where any income earned by the fund, after tax, is kept in the unit rather than paid out as a distribution. This means the capital value of the unit increases.

Past performance over 1, 3 or 5 years will give you an indication of how your chosen fund has performed against a sector benchmark.

A sector benchmark is an industry standard against which the performance of an individual investment fund is measured against its peers. There are a number of benchmark providers, for example the Investment Management Association (IMA).

Past performance is not a guide to future performance, and should not be used as the only selection criteria when choosing funds.

Within each fund your investment will be pooled with many other investors. The investment will then be managed for you and all the other investors.

The funds available through Nationwide are managed in different ways depending on the fund manager's aims and objectives for each individual fund. There are three types of management style currently used:

• Active managed: The fund manager will be selecting the assets that they believe will perform the best. This will be based on research and would typically include the potential prospects of stocks and shares, and economic conditions. The fund manager will generally aim to out perform a specified benchmark, often an index or combination of indices. These are typically more expensive than passively managed funds.
• Multi Manager: A Multi-Manager fund is slightly different. Instead of investing in actual assets, Multi Manager funds invest in funds provided by their own business and other fund management companies. The multi manager will aim to build a portfolio of the best funds available in the market, often including funds that are only available to professional investors. A research team will look at economic conditions, with the aim of identifying which assets should be included in the portfolio. Due to the additional layer of fund management, they are more expensive than actively managed funds.
• Passive managed: Often called 'index tracking funds'. The fund's aim is to track the performance of a specified index as closely as possible. The fund manager will typically put in place a series of systems and controls to ensure that the fund performance is in line with the index it is tracking.

Different funds have different charges but they may include the following:

• Initial charge - a one off charge the fund manager deducts from every investment you make;
• Annual management charge - the fund manager deducts this ongoing charge from the fund. The unit or share price takes account of this charge. It covers the costs of managing the fund