Investments

The opportunities for investing your money in the modern financial climate we live in seem endless. The world of investments can be confusing to most people and the choice can be overwhelming. However, investments can be grouped into three main classes: Asset Classes; Pooled Investments and Tax Wrappers.

There are four main Asset Classes which are Shares, Property, Bonds and Cash deposits.

Shares, also known as equity or stock, can be purchased through the Stockmarket, either directly or through a broker. As a shareholder you become part owner of a company which enables you to have the right to vote on certain issues. If the company thrives, the shares grow, as does your potential profit from selling the shares. You may also receive a dividend which is an income paid to you from any profits made.

With successful Property investments you can get regular income from receiving rent from a tenant and also benefit from any capital growth if the property you own rises in value. You can let or sub-let private or commercial properties.

When you buy a bond what you are doing is loaning money to a government, local authority or a company. As the lender you will be paid interest on the loan and get the initial amount returned to you at the end of the term. You may see this type of investment referred to as: Gilts (government loan); Corporate Bonds (company loan); Debt Securities, Fixed Interest and Loan Stock. These types of investments can give you a steady regular income.

Cash Deposits are generally considered to be a safer type of investment but the rewards may not be quite as attractive over the long-term. Savings accounts in banks or building societies are examples of Cash Deposits and are considered a good short-term investment.

The second main class is Pooled Investments. You may have heard of Life assurance Bonds, Investment Trusts and Open Ended Investment Funds. With all of these products you invest your money with other investors in order to save on costs and to potentially minimise any risks involved.

Pensions and ISAs are examples of the third main class – Tax Wrappers. Simply put, these are tax breaks which you can use to reduce the amount of tax you pay on the investment. With Tax wrappers you will have certain rules to abide by, but they can be a good way of protecting part or all of your investments from tax.