In the UK, we are nothing if not spoiled for choice when it comes to ways to invest our funds. This is a fine thing of course, except for the fact that the sheer range of possibilities can make it difficult to choose, especially if the wrong choice is unnecessarily risking our funds. That is why, for investment advice UK, the sensible course is to consult an independent financial adviser before making any commitment to invest.
The tried and tested, most conventional means of investing in the UK is through the purchase of stock or shares in an individual company. If the company’s assets are valuable and it has the potential for generating profit, more people will want to own such shares and, so, their traded price goes up. By the same token, however, when the company’s fortunes take a downturn, more will be selling their shares and the traded price goes down. This is what makes investment in stocks and shares a relatively high risk business.
For investors who are more risk-averse, an equally conventional method of investment has been the purchase of a company or government-issued bond. A bond is effectively an investor’s way of lending the company, or the government, money. The rate of interest paid on the loan is agreed at the outset, and the borrower guarantees to repay the amount of the bond after a fixed period of time. It can be readily appreciated, therefore, that this represents a considerably lower risk than the purchase of stocks and share. Indeed, in the case of a government bond, the government is considered to be such a reliable borrower – in terms of its commitment to repay the bond – that these are called “gilt-edged stock”.
Shares and bonds in the UK are both forms of direct investment. As the financial services industry has developed, however, other methods of investment have been devised to allow individual investors to spread the risk that they would otherwise encounter by investing directly in stocks and shares, yet still enjoy generally higher returns than they might realise by holding corporate bonds or gilt-edged stock.
Thus, there have been established ways for a number of investors to pool their investments in a wide-ranging collection that mixes shares, bonds, gilts, property and other dedicated vehicles such as “hedge funds” or “guaranteed funds”. The mix ensures that the risks are spread between the different sources and types of investment. The principal variations on such a pooling of investments are in the differences between unit trusts, in which the investor buys a number of units in the portfolio of investments; investment trusts, which are effectively rather like investment companies, in which the investor buys shares in the company itself; and Open-ended Investment Companies (OEICs), whose units of investment are traded at the same price to both buyers and sellers and whose structure includes various sub-funds comprising different blends of investments, so that individual investors can easily switch from one sub-fund to another.
What all of this means for anyone seeking investment advice, UK, is that the picture is so richly varied that only the independent financial adviser can offer the best guide to the routes available and to the best advice for the individual investor.