Campbell Alexander Financial Management are here to guide you and advise on what Investments, regular or lump sum, are exactly right for you, given your unique personal circumstances.
Saving and investing is about balancing the risks you are comfortable with alongside the potential rewards. As a general rule, the higher the risk, the bigger the potential rewards - but also the greater the potential losses.
Whatever your investment objectives are for the long-term, it is wise to set aside short-term savings of at least three months take-home income to meet emergencies. This should be held where you can access your money easily.
Your investment goals and attitude to risk are personal and may change over time, particularly as you near retirement. You will probably find you need to review your approach to investing as time goes on.
Basic savings
Banks and building societies are normally safe homes for your money where you can usually expect to get back the money you've saved £1 for £1. In return for that security however, your money may not grow by much - and inflation could even reduce the value of your savings and any growth- a major problem for savers in todays’ economic climate for example.
You can Invest up to £20,000 each fiscal tax year into an Individual Savings Account (ISA). You don't have to pay personal income tax or capital gains tax on any interest/return your savings earn in an ISA. Some National Savings & Investment products, such as Index-Linked Savings Certificates and Premium Bonds are tax free too.
Other investments
If you have money that you can save for the longer term, say 5 to 10 years, you might want to think about investing it in different types of assets. An asset is something that you own like cash, a share in a company, or property for example. Here are some examples of different assets.
- Corporate and government bonds - these are 'loans' to the government or companies that pay you interest in return. Government bonds are also referred to as gilts.
- Investment bonds - these are products from life assurance companies which invest your money in other funds and assets to provide you with returns over the medium to long term – see Guide to Investment Bonds
- Open-ended investment companies (OEICs) - these also invest your money in other funds and assets to provide a return – see Guide to OEICs/Unit Trusts
- Stocks and shares ISA - here your money may be invested in funds which invest across several assets including stocks and shares. This type of ISA also has tax benefits in that you don't pay any personal income tax or capital gains tax on any profit you may make – see Guide to Stocks and Shares ISA
- National Savings & Investments - these are a range of savings and investments that are backed by the Treasury, which promises to guarantee your capital.
- Property - this may involve investing in residential properties or a holiday home to rent out.
- Shares/Equities - direct investment in individual companies. Here you take a stake in the company and if it does well you may get a dividend, which is a share in the profits. The value of your share may rise or fall depending on many things including how well the company has performed.
Don't put all your eggs in one basket
Putting your money into different types of assets means you are spreading your risk, because if one doesn't do so well, another may do better. This is called 'diversification'.
You can choose to spread your money across shares, bonds and property, for example. But if you don't have the expertise or huge sums to do this effectively, this can be a struggle. Instead of the DIY approach, you may want to consider investing in funds where your money is pooled with that of other investors to create a fund or portfolio of funds. Your money in the fund/portfolio may then be invested across different assets, or in a particular type of asset, or in a combination of funds – called a portfolio. You get the potential benefits of an investment professional looking after your money as well as being able to access some types of investment that may not otherwise be available to you had you chosen to invest directly.
More and more these days, clients have a tendency to use different funds, and different wrappers (e.g ISA or pension for example) but Invest in a way where they can view all of their assets in a single place. This is provided most commonly via a (so-called) ‘Wrap’ or Platform’.
