Types of investment

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Hedge funds

Hedge funds are usually only open to the super-rich or to financial institutions with millions to invest – but other people can invest in certain funds which themselves invest in hedge funds. If you want to invest in such funds you need to understand what they’re about.

Tax and property investment

You can invest in property in two ways – directly or indirectly. Both ways involve some complicated financial issues, and one of those is tax. You should do your best to minimise tax to get the most out of your investment.

Popular investments at a glance

The most popular types of investments are investment funds where your money is pooled with other investors and spread across a variety of different investments. This is called ‘diversification’ and helps to spread risk.

Venture Capital Trusts

Venture Capital Trusts (VCTs) are listed companies that are run by a fund manager and which, in turn, invest mainly in smaller companies that are not quoted on stock exchanges.

Investing in shares

Shares are one of the four main investment types, along with cash, bonds and property. They carry risk, but they can offer the highest returns. Here you can find out what they are, how to invest in shares and what risks are involved.

Community Shares

All enterprises need money to start, grow, and be sustainable. However, it can be difficult for local businesses or enterprises to find the capital they need. Community Shares (also known as Withdrawable Share Capital) allow you to invest in an enterprise that aims to benefit your community. You might come across them because you’ve been invited to support a venture, or you might be looking for a different way to invest some spare cash.

Investment trusts

An investment trust is a company that raises money by selling shares to investors, and then pools that money to buy and sell a wide range of shares and assets. Different investment trusts will have different aims and different mixes of investments.

Tax and qualifying life insurance products

If you’ve used up your ISA allowance and you’re looking for other tax-efficient savings and investment options, life insurance is something you should look into. There are policy options that do more than just pay out when you die. You can use them as tax-efficient places to store and grow your money.

Stocks and shares ISAs

From July 2014, ISAs (‘New ISAs’) can be used to hold stocks and shares or cash, or any combination of these, up to the current annual limit. An ISA is a ‘wrapper’ that can be used to help save you tax. This article looks at Stocks and shares ISAs.

With-profits funds

If you save regularly or invest a lump sum using a life insurance policy, you might choose to invest in a with-profits fund. These aim to give you a return linked to the stock market but with fewer ups and downs than investing directly in shares. However, they are complex and are not as popular a form of investing as they used to be.

Investment bonds

Investment bonds are life insurance policies where you invest a lump sum in a variety of available funds. Some investment bonds run for a fixed term, others have no set investment term. When you cash investment bonds in, how much you get back depends on how well – or how badly – the investment has done.

Endowment policies

An endowment policy is an investment product that you buy from a life assurance company. They are set up as regular savings plans and at the end of a set period pay out a lump sum. The policy includes life assurance, so it will also pay out if you die during the term.

Children's Bonds

National Savings and Investments (NS&I) Children’s Bonds used to allow you to invest a lump sum on behalf of a child under 16. However, as of 30 September 2017 these saving bonds are no longer available. This guide explains how Children’s Bonds worked, what to do if you have one maturing soon and what the alternatives are.

Tracker funds and exchange traded funds

Tracker funds and exchange traded funds (ETFs) are investments that aim to mirror the performance of a market index. A market index follows the overall performance of a selection of investments. The FTSE 100 is an example of a market index – it includes the 100 companies with the largest value on the London Stock Exchange.

Unit Trusts and Open-Ended Investment Companies (OEICs)

Unit trusts and Open-Ended Investment Companies (OEICs) are professionally managed collective investment funds. Managers pool money from many investors and buy shares, bonds, property or cash assets and other investments. This guide covers on-shore, that means UK-based, OEICs and unit trusts.

Spread bets and contracts for difference (CFDs)

Spread bets and CFDs are leveraged products. They are typically used to make short term bets or trades based on whether you think the price of a particular underlying asset is going to go up or down. Underlying markets offered include foreign exchange, equities, indices and commodities.

Fixed interest securities – gilts and corporate bonds

Fixed interest securities are a way for companies or governments to raise money by borrowing money from investors. Securities issued by the UK Government are also called ‘gilts’ or ‘gilt-edged securities’, while securities issued by companies are known as corporate bonds.

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