The choice of investments available within the market place is diverse so it is imperative to obtain qualified and professional advice to ensure that you make the right decisions.
Investment choices include:
Cash
Cash deposits provide a high level of security for investor’s money however they generally provide little protection against inflation which over time is likely to erode the capital value and reduce its buying power. Cash offers relatively low returns although the monies are easily accessible.
Fixed Interest Securities
Fixed Interest Securities including Bonds and Gilts are issued by Government’s, Companies and other official bodies as a method of raising money to finance their longer-term borrowing requirements. In return for lending money to these Institutions, the owner of a Bond is entitled to receive regular interest payments and usually a repayment of their capital at the end of a pre-determined period. You can view these as a loan to a company or Government these are useful investments for generating income and Index Linked Gilts provide a useful hedge against inflation.
Property
Until the development global stock markets, property was virtually the only asset-backed investment available. Today it provides a way of diversifying an investor’s portfolio and includes both residential and commercial property.
Equities or Shares
An Equity represents a part ownership of a company’s capital and is an alternative name for an ordinary share. Investors buy shares in the company because they expect to receive income in the form of dividends and to achieve possible capital growth. They hope that rising company profits will lead to increasing dividends and/or growth in the value of their shares.
Unit Trusts, OEICs and Investment Trusts
These are Collective or Packaged Investment Schemes where investors participate in a large Portfolio of equities or other assets with many other investors giving them the ability to diversify their risk. These are a good way to invest because the investor’s cash can be pooled to a much larger fund giving considerable diversification. An investor can achieve a Balanced Portfolio at a modest cost because the fund managers will invest in a spread of investments.
Life Assurance based Investments
Life Assurance has developed into an important investment product and can provide a wide range of investment opportunities including With-Profit Policies, Unit Linked Funds, Friendly Societies, Onshore and Offshore Single Premium Insurance Company Bonds and Annuities. Single Premium Insurance Company Bonds in particular have some attractive tax advantages.
Ethical Investment Funds
The origins of Ethical Investing can be traced back to the 18th and 19th Centuries when many religious organisations avoided making investments in companies that were involved in areas such as alcohol production and gambling. Retail Ethical Investment Funds were introduced in the UK in 1984, however investors must be aware that such funds do limit the investment choices available to the fund manager which can impact performance going forwards.
Individual Savings Accounts (ISAs)
ISAs were introduced on the 6th April 1989 as a replacement for Personal Equity Plans (PEPs). An ISA is not in itself an investment but merely a tax wrapper within which a wide range of savings and investment products can be held, free of UK income tax and capital gains tax. They can hold cash deposits, certain life assurance policies, investments in UK and Overseas Shares and Corporate and Government Bonds which can either be held directly or through Collective Investment Schemes. These represent very tax efficient investment vehicles.
Other Investments
Other choices available to an investor include investments in Unlisted Securities, Enterprise Investment Schemes (EIS), Venture Capital Trusts, (VCT), Derivatives, Exchange Traded Funds (ETF), Hedge Funds, Offshore Funds, Employee Share Schemes and Child Trust Funds (CTF) to name but a few.
Hopefully you can see that there is an enormous choice available to you and it is important to any investor to seek professional advice to ensure that not only are their funds invested in areas to suit their needs and risk profile, but they are also invested in the most tax efficient way possible by being held within the correct tax wrapper. As nothing stands still it is important that any investment is regularly reviewed.
At TFMG we provide a tiered service proposition to match your investment goals and aspirations. Why not contact us to arrange a no obligation meeting and see how we can help you and your investments stay on track.
For more information on the service we offer see ‘What we do’.
We care, you prosper
The Financial Management Group is the trading name of MELLOR ASSOCIATES LIMITED, Independent Financial Advisers, Authorised and regulated by The Financial Services Authority. Mellor Associates Limited, registered in England. Registered No: 5303877. Registered Office - 26 Lower Kings Road, Berkhamsted, Herts, HP4 2AB. mellow Associates Limited is a wholly owned subsidary of MELLOR Limited.