Investment

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Aiming for capital growth and income

The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.

Cash saved in the bank can bring a warm glow, as we all need ready money for daily life and a reserve for larger spends now and then, but you can have too much of a good thing. There’s always the risk that bank balances will lose some of their spending power. It’s easy to forget the damage inflation does when it gets a hold. It could take off again and interest earned may not keep pace.

Many people choose to invest a lump sum or regular amounts in stocks and shares for the medium to long term. This can, in time, grow your capital to combat inflation and give an income in the form of dividends paid from company profits, though neither is guaranteed. Such ‘equity’ investments involve the risk that chosen companies or markets may perform badly, hitting the value of your investment and the income from it.

So, spreading investment risk is important and this can be done through a ‘pooled’ scheme, giving you modest exposure to many companies. Unit trusts, OEICs, investment trusts and investment bonds are the main ways to invest in a range of companies or markets. With many pooled schemes, holding within an ISA to get tax breaks can enhance the returns. Worth exploring, we think you’ll agree.

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Investment
Unit trust

Spreading stockmarket investment risk across sectors, markets and global regions is helpful. This is made possible by pooled schemes such as unit trusts. You can buy/sell units at offer/bid prices based on the market values of the shares held by the unit trust. In many cases, units can be held in an ISA.

 

OEIC

As pooled investment funds, open-ended investment companies have a lot in common with unit trusts but issue and redeem their own shares at a single price rather than offering dual-priced units. OEICs are akin to ICVCs, investment companies with variable capital, and you’re allowed to hold either in a stocks and shares ISA.

 

Investment trust

Sometimes called closed-end funds, investment trusts invest in a themed or general range of shares. Their own shares are quoted on the stockmarket and traded like other shares, so the price is not derived directly from the value of the investments they hold. You may hold investment trust shares in an ISA.

 

Investment bond

A pooled scheme offered by insurance companies, an investment bond provides a spread of risk across a mix of companies and markets. Your bond is linked to a modest level of life assurance to qualify for tax treatment that may help you with tax planning, for which purpose it may be split into segments.

 

ISA

In 2014 the popular individual savings account that offers tax breaks to investors became more flexible and annual limits were hiked. Two-way switches between cash ISAs and stocks and shares ISAs are now allowed. Junior ISAs are well established and, from December 2015, Help to Buy ISAs bring a state contribution to first-time homebuyers’ deposits.

Tax treatment varies according to individual circumstances and is subject to change.

 


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Springboard Financial is a trading style of Charles Derby Financial Services Limited which is an appointed representative of Quilter Mortgage Planning Limited and Quilter Financial Services Limited who are authorised and regulated by the Financial Conduct Authority Registered in England and Wales 5693185. Quilter Financial Services Limited and Quilter Mortgage Planning Limited are entered on the FCA register (http://www.fca.org.uk/register/) under reference 440703 and 440718.

Registered Office: Charles Derby, 6 Tollgate Business Park, Tollgate West, Stanway, Colchester, Essex CO3 8AB. FCA authorised No. 440703.