Asset types

Cash
It is important that sufficient funds are retained on deposit to cater for an investor’s short term needs. There is a wide variety of instant access savings accounts, offered by both high street and online institutions, which offer competitive interest rates.

Fixed Interest Securities
Fixed interest securities are technically loans from the investor to a company or government issuing the investment. They are usually issued with a nominal value of £100. As the name suggests the investments pay a fixed level of interest each year from the date of issue to redemption, when the loan is also repaid. In the interim many are traded on the stockmarkets, at a price which is dependent on whether the fixed interest rate is competitive to prevailing market rates.

Government backed short dated securities, Gilts, are at the lowest end of the risk spectrum, producing a predictable and steady return. Long dated Gilts carry a slightly higher element of risk and somewhat less predictable return, but chosen wisely can increase the return of a portfolio. Corporate bonds are similar to Government bonds, but tend to offer higher yields as the security of companies is considered lower than that of governments.

Property
Investment in bricks and mortar offers the potential for both income and growth. The former reflecting rental income generated and growth being the capital appreciation of the property over the longer term. Notwithstanding the very largest of private investors and institutional investors, it is not necessarily practical for most people to invest directly in property. However, exposure can be obtained through pooled investments, such as Unit Trusts. Commercial property is split into three main areas – retail, office and industrial, each of which has its own particular features.

Equities
Investment in company shares offers much greater potential for gain, but with greater volatility. Whilst returns vary enormously from company to company, diversification across various sectors and geographical regions can greatly reduce investment risk.