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Savings and Investments

Guide to savings and investments

What are investments?
Investments are something you buy or put your money into to get a profitable return.  Most people choose from four main types of investment, known as 'asset classes':

  • Cash

  • Fixed interest securities (also known as Bonds)

  • Shares

  • Property

There are other types of investment available, including commodities like oil, coffee, gold etc, foreign currency and collectables like art and antiques.

Returns
Returns are the profits that can be made from an investment. These can vary depending on the type of investment, such as dividends paid from shares or the rent received from property.

How fees reduce investment returns
Possible investment fees include initial set up costs and ongoing fees such as annual management charges (commonly referred to as the "AMC"). The ongoing charges in particular can eat into investment returns. These fees are taken directly out of the investment fund which has the effect of reducing the return (or profit) you have can earn on an investment.  

Risks
All forms of investments involve some degree of risk. These risks range from a lower return than expected to the investor losing money. Examples of risks include share prices not increasing as expected or reducing house prices lowering the value of property.
However the level of risk involved differs depending on the type of investment and there are ways that the risks can be managed. Expert advice should always be sought.

When to start investing
Investing is a way to save and make money. It gives your money the potential to grow at a higher rate than you could acheive otherwise over the medium to long term. There can be many reasons to begin investing, such as if you are saving for a deposit on a house, a child’s education or just for a rainy day.

 
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