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Mutually beneficial

Scottish Mutual has introduced a unit-linked bond with access to 38 funds, including a with-profits fund and 23 external funds.

The flexible investment bond allows investors to choose up to 10 funds initially, which they can add to once the bond is taken out. The funds cover a range of regions and sectors and include Scottish Mutual&#39s UK equity, technology and ethical funds, plus external funds from the likes of Fidelity, Framlington and Gartmore.

The bond&#39s main appeal is the ability to mix and match investment funds according to investor&#39s requirements and attitudes to risk within a single product. Investors who are cautious and seeking income could construct a portfolio around the with-profits fund. Those inclined towards capital growth with a higher degree of risk could gain exposure to the technology fund.

The external funds from eight fund management groups are also a plus since one group cannot excel in all areas of the market. However, attempting to be all things to all investors could be confusing and those who use the external funds may have to pay higher charges.

According to Standard & Poor&#39s, three of the Scottish Mutual funds are second quartile, five are third quartile and two are fourth quartile based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to January 21, 2002. There is no three-year past performance for Scottish Mutual&#39s corporate bond, with-profits, ethical and technology funds.

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