The Business Bulletin
Money matters for business and life I guess if you’re like most people, you have your investments handled by your financial adviser? And I’m guessing you entrust that person to invest wisely and optimise the return on those investments. It may be however, you don’t know the options that are available and whether to question your FAs choice of portfolio.
The intention of this article is to
The cash needed to redeem your
hear that one investment is
give you an overview of the choices
holdings is often stored in a so-called
low risk and another is high
available to you and the pros and cons
Money Market Fund which sometimes
risk. It’s no such thing!
of each. So let’s take a look.
can be a place for you to place your savings when interest rates there are
Cash and near cash Is your money in the bank or building society safe? Certainly, many believe so. Subject to changing compensation levels in case of bankruptcy, it is. You’ll get £100 back for £100 deposited. However, the value of your savings isn’t necessarily safe. If the interest you earn doesn’t keep up with the rising cost of the things you want to buy, then your £100 taken out later might only buy say £96 worth of goods in the shops. That’s why we need to invest. You can explore near cash holdings such as Certificates of Deposit, Floating Rate Notes and Time Deposits or even consider National Savings but none of these will yield a potential capital gain as well as interest while you’re invested. When you invest in pooled funds (Unit Trusts and OEICs – Open
higher than in your high street bank. As we approach the stock market, I suggest three golden rules to remember – ■ Firstly, always invest where you can potentially make your original investment grow – that is, make a capital gain; while also receiving interest (dividend or yield). Always earn these two kinds of return on every penny you invest! ■ Secondly, in today’s fast-
its value and investment in direct property, such as buy-to-let, is battered by nasty tax erosion, where to next?
Fixed interest investments There are essentially just two main ways in which you can invest through the stock market. Lend your money at interest or buy ownership of companies by purchasing shares. You can lend your money to the UK Government, global governments or to business enterprises through stock
changing financial world, never
exchange quoted companies in the
invest where your money is
UK or worldwide.
locked in or not liquid enough to allow instant withdrawal. Remember, bricks and mortar locks your money in. ■ Thirdly, always remember that
Ended Investment Companies), your
the risk of any investment
fund manager will normally buy your
depends on the changing
investment back from you, when you
economic, social and political
want to sell, turning your holdings into
events surrounding the type of
cash. He/she must therefore have ready
investment you hold. Always
cash to be able to do so.
question when you read or
22 | Issue 17 – Finance
So, if money held in cash loses
The Fixed Interest route means you, or your pooled fund manager acting for you, lends your money to governments or companies. In the fund supermarket you walk up the fixed interest aisle. On the shelves are bundles of fixed interest funds offered by a good number of fund managers, all wanting you to choose to invest with them. Each fund offered will have a Fact Find Sheet where you can read all
