Prime Time Financial

Types of Investment

For many people, investing means the stock market. But that is only one part of the investment scene. For retail investors, there are also:

• Fixed interest investments like government gilts or corporate bonds
• Property - where you own a house or two yourself with tenants, or have a stake in commercial property
• "Structured products" which provide a defined return if market criteria are met, and
• National Savings & Investments products

... to mention a few areas.

Even within the stock market there is a wide variety of investments to consider. For most people, investing via "collective" funds is more appropriate than buying individual company shares. Collective funds include unit trusts and investment trusts, as well as funds run by insurance companies which are available in products providing some life assurance cover.

What to Consider

All investments are certainly not equal. Here are a few things to consider:

• How long are you prepared to invest your money for?
  • Anything less than 3 years and you are likely to be better off with your money in a savings account
• What balance of Risk and Reward do you want?
  • More reward requires more risk - the value may go up and down more
• How can you take best advantage of your tax situation?
  • Tax allowances like the annual ISA allowance are generally worth using, as is tax relief on pension contributions
  • Inheritance Tax is an increasing issue later in life
• Are you investing to grow the value or do you need to take an income?
  • Does an income need to be a regular amount or can you cope with variations?
• Who should benefit from your investment?
  • Perhaps it should be jointly owned with a spouse? ... or in a trust for the benefit of family members?
• Diversify - look at your assets as a whole, and don't put all your eggs in one basket

Always remember that investments can go down as well as up, and that you may not get back the full amount invested.

Last reviewed 11th April 2012