What investment options are available?
Investments are usually ranked according to their underlying risk; from lower risk invests such as cash, to higher risk equity-based investments. Your portfolio should be constructed in a similar fashion, starting with easily accessible low risk investments, to potentially better performing equity-based investments. A well-balanced portfolio will diversify your investments across all asset classes in line with your attitude to risk. It will also make use of tax efficient investment wrappers such as bonds and ISAs to ensure your tax liability is kept to a minimum.
Starting with lower risk assets, the following 3 groups of assets list some of the investments that might be appropriate to a well-constructed portfolio:
1. Deposit Accounts and National Savings
- Bank and Building Society account
- National savings
Protected up to £85,000 by the FSCS, bank and building societies offer instant access and notice bank account. Cash deposits are at the foundation of portfolio construction. Liquid funds for emergency money, together with planned purchases, offer you the comfort of knowing that you will always have sufficient cash available should you need it.
National Saving Investments (NS&I) are backed by the HMRC Treasury and therefore your capital is 100% protected. NS&I offer a range of accounts, including bank accounts, guaranteed bonds and premium bonds. A full list can be found by following this link https://www.nsandi.com/our-products
NS&I products are not regulated by the Financial Conduct Authority.
2. Asset backed investments
Whilst cash balances offer security, the potential for growth is limited especially when inflation is considered. To gain better returns over the longer-term, asset backed investment should be considered. Typically, these will be ‘bundled’ into collective investments which allow a selection of investments to be held in one product. The following is a list of some of the underlying assets that can be held in this manner:
- Gilt-edged Securities (Gilts)
- Corporate bonds
- Property
These assets are considered to be less volatile than equity based investments, however fund values will fluctuate with market movements.
3. Equity based investments
Shares in companies can be held either individually or collectively. How they are held, where they are invested, and their geographical location will determine the overall risk and potential return. The following list of investment vehicles are ranked in order of risk:
- Unit Trust/Open Ended Investment Companies (OEICs)
- Investment Trusts
- Individual Shares
Shares will fluctuate in value based on individual performance, exchange rates, political risk and general market conditions. Whilst an OEIC might be considered lower risk than individual shares, it does depend upon on the underlying invest.
Disclaimer
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
How we can help you
Whether you are looking to grow your wealth or are at a stage in life where you need to take an income from your investments, at Clear Sense we will take time to understand your financial position, your requirements and your attitude to risk so that we can guide you through the various options available. We will build an investment solution, utilising the most appropriate tax vehicles to fit your individual situation. We will continue to monitor performance and rebalance your portfolio in line with your attitude to risk and changing circumstance.
