How do I decide what investments to choose?

You need to understand some basic investment fundamentals. As part of your financial planning, together with your financial planner, when you decide to take pension advice or investment advice there are three different elements to consider.

1. The tax wrapper and potential tax savings
2. The underlying investment fund
3. The asset class

What are Tax Wrappers?

Tax wrapper is the name given to a particular type of investment portfolio – for example, pensions, ISA, Unit Trust, Investment Trust, Offshore or Onshore Bonds, or OEIC (Open Ended Investment Company).  The tax wrapper is effectively wrapped around the underlying investment fund, meaning that the returns on the investment are subject to different tax rules.

Remember; don’t let the tax wrapper ‘tail’ wag the investment fund ‘dog’.  The tax implication is important, but it is not the most important thing when making money.  Being invested in the right asset class is much, much more important.

What is an Asset Class?

Asset Classes are the different categories of investments available.  For example:

• Equities or Shares – these are sub-divided into geographical areas ie. UK or EU.  Large or small companies – ICI or Next.
• Bonds – loans to government or corporations.
• Property – direct as opposed to property funds.  UK Property or International Property.
• Gilts – loans to government
• Commodities – gold, silver, oil etc.
• Cash or Money Market Funds and alternative investments – ground rent, fine art, wine, life settlement.

When you, together with your independent financial adviser and investment specialist, allocate the assets in your investment portfolio, you decide what proportion of its total value will be invested in each of the different asset classes you are including.

What is an investment fund?

There are many funds to choose from in order to build your investment portfolio and they all consist of the pooled funds of investors.  By collating the funds of large number of small investors into a specific investment (in line with your own, individual objectives), our choice of investment funds gives you access to a wider range of securities than you would be able to access on an individual basis.

Your money is invested in either one type of asset class (International Property Fund), or multiple asset classes (a Balanced Managed Fund).  These can be managed passively – by following an index or using an Exchange Traded Fund (ETF), or actively – by the fund manager who will make decisions to buy and sell according to what he believes to be the best course of action for you to achieve the highest returns.

As an investor, you buy units, or shares, in the hope that the value rises over time as the prices of the underlying investments increase.  The price of the units depends on how the underlying investments perform.

Any questions on investing money fundamentals?

Please call us on 01582 839280 if you still need to or Email us.