INVESTMENTS AND SAVINGS

The Financial Services Authority do not regulate all forms of Offshore Investments

Investment Advice
To create, maintain and increase hard earned money is a challenging task for most of us. History has shown that money left on deposit will gradually lose its purchasing power through the effect of inflation. Alternatively, highly speculative investment may produce substantial gain but also risk heavy losses.

Balancing these opportunities and the risks associated with them, with the correct degree of security is a difficult and specialist operation. It is a role that some investors choose to play themselves but which most prefer to leave to professionals.

Whatever type of investment or savings plan you choose, its performance is exposed to the effects of the economy and the skill of the organisation you trust to manage your money. The suitability of your investment is also open to change as your financial commitments and attitudes alter throughout life. As such it is vital to receive informed and unbiased advice before you commit your money to a particular investment course.

Questions you will need to ask will include:

	What are my financial aims?
	What is my time-scale for the investment?
	What is my attitude to investment risk?
	Is income or growth more important, or do I need a balance between the two?
	Do I anticipate a need for any withdrawals and when?

	Emergency Fund. The first priority is to make sure that you have funds which are easily accessible. This is usually a bank or a building society account.
	Know your attitude to risk (cautious, balanced, adventurous) and only choose investments which match it. The higher the potential reward, the greater the risk of financial loss. Your first consideration should be to preserve what you have from unnecessary risk, unless you specifically want a high risk package and you are sure that you understand you could lose a substantial amount of your money.
	Invest as part of an overall personal financial strategy. It is vital to ensure that your family will be well provided for if you die and that your retirement years will be made comfortable through sensible pension planning before embarking on other investments.
	Know why you want to invest. It could be for regular and growing income now or it might be to build up a capital sum with some future project in mind. Having a goal can clarify the strategy. What you do now can affect your future and that of your family.
	Be comfortable with your investments. Never lock money away in a long term plan if you need it tomorrow. You should be able to leave your money invested for the medium to long term – at least three to five years.
	Don’t put all your eggs into one basket. Look at pooled investments such as Unit Trusts and ISAs, which spread your money across a wide range of shares. The minimum investment is usually between £250 and £1,000, but there are also some monthly savings schemes from £20 upwards.
	Make the most of tax efficient investments. ISAs are a way of investing without paying any tax, either on the income or capital.
	Regularly review the progress of your investments. There is nothing to be gained by following share prices or market trends by the hour, but there are longer-term economic trends in the world which could affect your investments. Equally, your needs and those of your family can change.

	Unit Trusts/Open Ended Investment Companies There are currently more than a thousand Unit Trusts/OEICS from which you could choose. Some aim to produce capital growth whilst others provide income.
	Investment Trusts Investment Trusts, although in some ways similar to Unit Trusts (both are professionally managed, pooled investments) they are in many ways different. The main difference being that Investment Trusts operate as Public Limited Companies with fixed share capital. For the investor wishing to take a medium term view, Investment Trusts have much to offer.
	Capital Investment Bonds Once again, professionally managed, pooled investments. Insurance company bonds usually offer investment spread within a single policy and a convenient facility to withdraw a regular income. Up to 5% of the original investment can be withdrawn, tax-free. Taxation takes place within the fund and is dealt with by the insurance company. For basic rate tax payers, there will be no further tax to pay on gains. If you are a higher rate tax payer, you may be liable for additional tax on surrender on the bond, however this will depend on your tax position at that time. These savings can be a useful way of deferring your tax liability or avoiding it altogether.
	Individual Savings Accounts In simple terms, ISAs may be considered as wrappers which means that your investment remains virtually tax exempt. They can contain Unit Trusts/OEICS, Investment Trusts, Company Shares or Corporate Bonds.
	Off-Shore Investments For many investors, off-shore investments offer very real advantages when compared with other similar UK based funds as they are not subject to tax whilst they remain invested off-shore.
	Ethical Investments These are investments which avoid investing in companies who, participate in activities considered degrading to the environment, endorse trading in armaments or military hardware, are involved in the exploitation of animals. For further reading turn to our section on What are Ethical Investments.