Investments...

 

When investing, you take calculated risks to increase your chance of getting higher returns on your money, especially over the longer term (usually five years or more).

There are different types of investments. Each has its own level of risk but, basically, you take a risk with your money by investing in assets that could rise or fall in value. There is no guarantee you will make money or even that you will get back the same amount you invested in the first place. Investments are different from savings – they are typically designed for the longer term and involve different types of risk.

Before investing, it’s usually a good idea to have sorted out your debts, made sure you’ve looked at protecting yourself against unforeseen events, built up some savings, and arranged your pension – see Pensions (your pension is also an investment).
And, once you start investing, it’s highly advisable to spread your risk.

Types Of Investment

• The underlying investment itself will fall into what are referred to as asset classes. There are four main asset classes – Shares, Bonds, Property and Cash deposits. You can invest in each of these directly if you wish.
• Pooled investments. This is when you put your money with other investors to invest in one or more of the above asset classes. This spreads your risk and saves on costs. Open-ended investment funds, investment trusts and life assurance bonds are the most common pooled investments.
• Tax wrappers. These are tax breaks that you can – subject to certain rules – wrap around your investment, to shield it from either some or all tax. The wrapper can be around either the underlying investment or the pooled investment. The two most common tax wrappers are ISAs and pensions.