Trying to make sense of the investment industry is no mean feat and it’s widely recommended to get a professional opinion before you make any hasty decisions – this is your hard earned money you are considering investing into a business, person or product after all. Investment specialists spend years gaining and building up their expertise, so it’s wise to take advantage of this in-depth knowledge. In this article we’ll cover some of the basic and more widely used types of investment.
Stocks and shares are a common type of investment covered under the equity umbrella. Equity encompasses a broad range of terms from investment into one company or organisation (high risk) to a fund that represents global markets and thousands of companies, spreading the risk out.
For those searching for low risk products, deposit accounts are generally considered to be one of the safest forms of investment where people simply invest their money into a savings account. Be sure to consider the rate of inflation when applying for these though as this must be subtracted from the interest rate to see the true return on investment. In addition to this, these are taxable so may not offer as good a return as they look to. Although low risk, they also offer low return.
At the opposite end of the risk spectrum we have property, a high risk and hugely complicated type of investment. Although it’s popular and there are those that make huge amounts of money on it there are more people that lose out massively through making these high risk investments into something they know little or nothing about. The volatile nature of the economy and market too make it even more risky so it’s imperative to have a good think before deciding whether property is the right investment choice for you.
A previously very popular type of investment commonly associated with mortgages or loan repayments is endowments. The methodology with these types of policy are that an endowment is taken out and money borrowed on an interest only basis for the total term of a loan or mortgage, at the end of this term (assuming there is growth of the policy from the policy provider) there is a lump sum available and often some extra funds left over on top of this amount. Although this was previously an investment type that had great success, in more recent years the risks involved with this type of policy have become more apparent making it a less popular option.
To conclude, for those looking to make an investment of some description, we strongly advise visiting a professional first so they can match your investment needs with the right policy to suit your situation and means.
For advice on all the above and other financial services including pensions, SIPP’s and bonds you can visit the Financial Planning Partners to chat with an advisor.