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There are is a wide range of savings and investment vehicles and options available to the investor. The first question to ask is “what are you trying to achieve?” Do you require investment advice for Growth or Income or both? Are you investing for a wedding anniversary, greater income in retirement, a special holiday, or simply a better return?
Building an investment portfolio must take into account tax opportunities and implications, attitude to risk and reward and balancing it to the need for income, growth or both.
Following a detailed personal review of your current financial position, aspirations and objectives, we will assess all of the above factors with you before making recommendations for your asset portfolio. Wealth creation and management is an ongoing process and we will look to meet regularly to ensure the best chance of your objectives being met.
Unit Trusts
Unit trusts are collective funds which allow private investors to pool their money in a single fund, thus spreading their risk, getting the benefit of professional fund management, and reducing their dealing costs.
Features of unit trusts:
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They are open-ended which means that the trust can issue new units in response to demand. This means that unit trusts trade at their net asset value - that is the value of their underlying assets divided by the number of units in issue.
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Different trusts have different investment objectives. Some invest for income, some for growth. Some invest in small companies, some in large. Some invest in the UK, some in other territories. As an investor you can choose the trust that matches your interest and objectives.
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Investment decisions are made by professional fund managers appointed by the trustees. These managers make annual charges.
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Every day the trustees compute the value of the trust, divide it by the number of units in issue, and produce a bid and offer price based on that calculation. Unfortunately, when you invest in a unit trust, you usually never know the price you will be charged for units until the next valuation point, typically midday the following day.
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unit trusts are well suited to regular savers who want to drip-feed money into the market every month. With unit trusts, you can invest as little as £50 per month, averaging the acquisition cost of your shares over many months.
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Many unit trusts make an initial charge when you invest, and their management charges are deducted from fund income.
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Unit trusts can be held in an ISA.
Investment Trusts
An Investment Trust is a company quoted on the London Stock Exchange which invests its shareholders' funds in the shares of other companies.
Points to note about investment trust are:
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They enable private investors with limited funds to get diversified share ownership and without incurring heavy dealing costs.
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They enable investors to get exposure to markets that they may not be able to reach themselves (e.g. to emerging countries). Different trusts also have different objectives (e.g. growth or income).
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They enable investors who don't have the skill or inclination to invest directly in companies to get the advantage of professional fund management (although see point 6 below).
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it is easy for investors to drip-feed money into investment trusts over time by using monthly savings plans.
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Unlike unit trusts, investment trusts are closed end funds. That is, there is a fixed number of shares in circulation, and the price of those shares is determined like other quoted shares - by supply and demand. This means that IT shares often trade at a discount to their Net Asset value (i.e. the value of their underlying investments) and it also makes IT shares more volatile than unit trust prices.
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ITs are actively managed funds which try to produce total returns better than the market average.
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Investment Trusts can be held in an ISA.
Investment OEIC
'OEICs' are collective investment funds that have some of the features of an investment trust and some of a unit trust.
Like investment trusts, OEICs are companies that issue shares on the London Stock Exchange, and which use the money raised from shareholders to invest in other companies. Unlike investment trusts, they are open-ended which mean that when demand for the shares rises the manager just issues more shares.
The price of OEIC shares is determined rather differently. More like a unit trust, in fact, with the key factor being the value of the underlying assets of the fund. But in contrast to unit trusts, there is no bid/offer spread with OEICs, so the price of the shares should be the same whether you are buying or selling. Prices are published daily.
Different OEICs have different investment objectives. Some invest for income, some for growth. Some invest in small companies, some in large. Some invest in the UK, some in other territories. As an investor you can choose the OEIC that matches your interest and objectives.
OEIC are available for lump sum investments or for regular savers who want to drip-feed money into the market every month.
OEICs are popular on the continent but were only launched in the UK in 1997. There are around 300 up and running, with a wide range of investment objectives. You can put an OEIC into an ISA.
Investment bond
An investment bond is a unit linked single premium whole life assurance policy. The premium is invested in unit linked life funds and the life cover is generally minimal. As a life insurance policy Investment Bonds are taxed differently to unit trusts, OEICS and Investment Trusts and under certain circumstances tax advantages may be enjoyed. For example 5% annual withdrawals can be taken with no immediate tax liability. If the proceeds of the bond are subsequently taken when a former higher rate taxpayer has become a basic rate payer, there may be no higher rate tax liability.
“The value of the funds can fall as well as rise. Past performance is no indication or guarantee of future performance.”