A share is an investment in an individual company and buying even one share gives you part ownership of that company. This entitles you to benefits including receiving dividends and registering your votes in company activities such as annual general meetings.
Shares remain a popular investment choice thanks to their potential for returns, and their opportunity to invest directly in individual companies. Over the longer term, history shows the benefits of investing in shares typically far outweigh those of holding your money in lower-return assets such as cash savings.
An investment trust (also known as an investment company) is structured as a company and listed on a stock exchange. It is a type of collective investment, investing in stocks, bonds, property and other assets. An investment trust sells a fixed number of shares at launch and so has a fixed pool of assets to invest. The fixed asset structure means that a trust's share price may be at a discount or premium to the actual value of the underlying assets.
Bonds and Gilts
Bonds and gilts are typically low risk fixed income investments which can be a valuable part of any portfolio. Corporate bonds are issued by corporations and gilts are bonds issued specifically by the British government to borrow money.
There are different types of gilts but most will typically pay a fixed coupon biannually and mature on a set date in the future. Other options are Index-linked gilts which track the Retail Price Index (RPI) or you can buy undated gilts, where there is no fixed redemption date.
Funds (Unit Trusts & OEICs)
Unit trusts and open-ended investment companies (OEICs) are types of collective investment, which allow investors to pool their money with other investors to invest more efficiently in stock and bond markets. As 'open-ended' funds, more shares are issued each time someone invests and sold when they exit. In practice, this means that the asset pool will expand and contract as people buy and sell out of the fund and that the price of the fund always reflects the value of the underlying stocks or bonds.
ETPs / ETFs
Exchange-traded products are collective funds that trade on a stock exchange. They are designed to track the movements of an index, commodity or basket of assets. They will do this either through taking positions in the underlying securities that make up an index in the same weights that they appear in that index ('physical replication') or through buying a derivative instrument that exactly matches the performance of the index ('synthetic replication'). ETPs do not generally trade at a discount or premium to their net asset value.
Venture capital trusts started life in 1995. They were launched to encourage investment in early stage companies by offering attractive tax breaks to investors. VCTs must be approved by HMRC in order for investors to receive the tax breaks, and there are limits on the size of companies in which VCTs can invest.
Open an account
Opening an account is easy and you will need:
- Your address details for the last three years
- Your debit card details including bank account number and sort code
- Your National Insurance (NI) number
Please be aware of the risks involved. The value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. Past performance is no guarantee of future performance. Tax treatment depends on your individual circumstances and may be subject to change. If in any doubt, please seek advice.
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