There are thousands of investment products, which options are best for you?
The choices become easier once the majority of investment options are grouped into four categories.
A selection from all four categories can be combined to provide a balanced portfolio.
The choice should take into account your financial requirements and risk profile. The FSA has guidance on choosing an investment spread FSA investment diversification
The four main Investment categories are.
| | EXAMPLES | SUITABLE FOR | RISKS |
VARIABLE INCOME
WITH FIXED CAPITAL | Bank or Building Society deposits and National Savings | Easy access short term saving | Income can be volatile, a rate drop from 4% to 3% is a 25% reduction. The value of income and capital can be eroded by inflation. Investor protection is limited to £50,000. |
FIXED INCOME
WITH
FIXED CAPITAL | Fixed rate bonds issued by Banks, Building Societies & National Savings. | Risk averse investors who want income now. | The value of income and capital can be eroded by inflation. Investor protection is limited to £50,000. |
FIXED INCOME
With
VARIABLE CAPITAL | Gilt edged securities issued by the Government, and Corporate Bonds. | Risk averse investors who want income now. | Inflation can erode the value of the income, the capital may fluctuate in value. |
VARIABLE INCOME
With
VARIABLE CAPITAL | Shares, Unit Trusts, OEICs, Investment Trusts and commercial property funds. | Long term investors, seeking the potential of increasing income and capital appreciation. Of interest if you want income now, or in the future. | Income and capital can fall as well as rise, returns may be volatile. Income should be limited to the current yield; otherwise it is possible to eat into capital. |
THE VALUE OF INVESTMENTS CAN GO DOWN AS WELL AS UP.
PAST PERFORMANCE IS NOT A GUIDE TO FUTURE PERFORMANCE.