Investments

 

There are many types of investment.

 

Deposit Based Accounts, such as:

National Savings, Bank accounts, Building society accounts, Cash ISAs

 

Investments such as:

Unit Trusts, Open Ended Investmet Companies (OIECs),  Investment Bonds. Investment ISAs

 

We will show you how the the features of each product can benefit you so over the medium to long term you can reach your financial goals. We will show you the level of Investment risk associated to each product and how to reduce risk whilst having the potential for higher returns. (see below)

 

 

 

General Fund and Asset Class Information.

 

Over the medium to long term most Investment Funds should increase in value, beating bank and building society interest rates.

However nothing is guaranteed and, at times, some funds may decrease in value depending on the market the assets are held.

 

A healthy Financial Portfolio will usaually have range of funds with a mixture of all the asset classes which will potentially

spread the Investment Risk and maximise the Potential Rewards.

 

A description of the main asset classes is shown below.

 

Deposit Based

This means that your capital is protected and you will always receive back at least what you have paid. However this type of investment will typically generate low growth, will be affected by inflation, interest is usually taxable and with some higher rate accounts you may have limited access. For example: bank and building society accounts, one or two year bonds and National Savings Accounts etc.  

 

Gilts (Fixed Interest)

These are loans to the governments, ie government debt, who pay a set rate of interest. They are regarded as low risk as there is little risk of default. Gilts usually do well at times of low bank interest rates, but if interest rates rise then they could become less attractive and the gilt trading value could fall.

 

Corporate Bonds (Fixed Interest)

These are basically loans to companies, who pay a set rate of interest. If bank interest rates are low then Corporate Bonds are usually more attractive. Although seen as low risk, their trading value could fall if bank interest rates increased or one of the firms, within the bond, defaulted on a loan.

 

Property Funds.

The managers buy commercial property such as warehouses, shopping centres, factories and office blocks. The value of the property can rise and rental income is paid, these can increase the value of the fund. However, the providers of these funds can, in poor market conditions, delay payment of any withdrawals for up to six months. This is because properties need to be sold and converted into cash.

 

Equities

The managers buy shares in different companies in the UK and world wide. The shares can increase in value and also a dividend, may be paid , these can increase the value of the fund. The value of equities can increase or decrease at any time depending what market they are in e.g Financial, Oil, Far East or Tech etc.

 

Mixed Asset Funds

These funds contain a mixture of all the asset classes as stated above.

The value of the funds will increase or decrease on a daily basis. Mixed Asset Funds tend to reduce overall risk because the managers diversify into a spread of asset classes and also invest in the UK and world wide. The managers can, within the fund rules, increase the risk and potential reward, by having a higher percentage of equities or they could reduce risk and potential reward by having a high percentage of Gilts or Corporate Bonds.

 

With Profits

With Profit plans are a type of a mixed asset fund. They tend to smooth out the ups and downs of the markets. An Annual Bonus can be added to each plan every year, depending on the profits. This bonus is guaranteed but Terminal or Final Bonus  at the end of the plan term, is not guaranteed. The managers may impose a Market Value Adjustment (MVA) in poor market conditions to protect existing members from large withdrawals by other members. The MVA will reduce the amount withdraw by a set percentage. The MVA is usually ends when markets and asset values improve.

 

Currency Risk.  Assets which are held worldwide or overseas will also be affected by currency movements, which increase or decrease their value