People invest for different reasons, it could be to help your children with university fees, or to retire on the beach in the Bahamas! Ultimately, it is to make your money work for you rather than you working for it.

All types of savings and investments (including cash accounts) have different risks attached. Risk means different things to different people. With investments, it is the possibility that you could lose money or that your investment may not fulfil all your expectations. Your view of risk is likely to depend on your short and long-term investment goals and how much you can afford to lose.

In simple terms 'risk' means that if you want the potential to gain more, you need to accept the potential to lose more. Whichever choice you make as an investor, you need to feel comfortable with the potential outcome. The key is to know what you are buying, and why.

Low Risk Investments

With low risk products, such as a deposit account, the return you get is fixed for long periods. The amount of interest you earn may move up and down over time, but the changes will be small, far apart and advanced notification is usually given. Except for inflation, your capital invested will not change in value. It won't go down, but revenue you'll generate will be purely interest based.

High Risk Investments

Higher risk investments are less predictable. Taking a chance on the stock market can potentially deliver substantial gains. Take Company shares. Investors in blue chip companies are less likely to fall casualty to big fluctuations, but it has happened. If you purchase shares in the Alternative Investment Market, the risks are higher, as you're funding activities for relative newcomers. But if you pick a winner, the financial rewards can be good.

You will need to keep your eye on the market and prepare for swings in value. Result announcements, inflation, currency and political changes can impact the performance of individual company shares and entire sectors. Knowing when to pull out or stick with your investment is part of the risk. You may not lose money selling your shares, but a sudden leap in value could mean missing out on future gains.

Risk vs Reward

The risks you are prepared to take are individual to you. The potential to gain more means accepting the potential to lose more. We can help you identify realistic investment goals that meet your evolving financial aspirations. With access to the entire investment market, we can then pinpoint the most suitable investment for your needs.
At a time where interest rates are low, but he cost of living is ever increasing, having an alternative to allowing your money sitting stagnant with a bank could be beneficial.
Investments allow you to utilise various tax wrappers that can prove advantageous.

ISAs

With an ISA, any growth is free from income tax as well as capital gains tax.
Your ISA does not close at the end of the tax year, you keep the investment on a tax efficient basis for as long as you keep the money in the ISA.
They do not need to be included on a tax return.

Onshore & Offshore Bonds

These types of investments are another tax efficient way of growing your money, as well as producing an income. They are deemed as non-income generating and therefore do not need to be included on tax returns.

 

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EIS/VCT

An Enterprise Investment Scheme (EIS) is designed to raise capital and invest in small unquoted companies and in return for the high risk nature of the investment you can claim immediate income tax relief of up to the 30% of the investment made.

As an alternative, a Venture Capital Trust (VCT) offers similar attractive tax advantages in return for again investing in high risk fledging companies. A VCT is slightly different to an EIS as the actual VCT itself is a quoted company.

Both EIS and VCTs are subject to maximum levels of income tax relief.

As EIS and VCTs are high risk products they are not suitable for everyone so it is very important you know the risks involved.

Financial Services Compensation Scheme

The FSCS is the UK's compensation fund of last resort for customers of authorised financial services firms. They may pay compensation if a firm is unable, or likely to be unable, to pay claims against it. This is usually because it has stopped trading or has been declared in default.

The actual level of compensation you receive will depend on the basis of your claim. The FSCS only pays compensation for financial loss. Compensation limits are per person per firm, and per claim category.
The maximum levels of compensation are:

  • Deposits: £85,000 per person per firm (for claims against firms declared in default from 30th January 2017). The FSCS will provide a £1 million protection limit for temporary high balances held with your bank, building society or credit union if it fails
  • Investments: £50,000 per person per firm (for claims against firms declared in default from 1 January 2010).
  • Insurance: No upper limit on the amount of protection. Long-term insurance benefits are protected 100%. Claims under compulsory insurance, professional insurance and certain claims for injury, sickness or infirmity of the policyholder are protected at 100%. 90% of other types of claim.

The above is for information only and should not be deemed as advice. Please speak with an Independent Financial Adviser before making investment decisions.

"We have now worked with Saj for nearly five years, going through the sale of my business, investment of the proceeds and pension fund, rationalising our investments into a series of manageable pots and helping with inheritance tax planning. Saj has done an immense amount of research into available and relevant options, clearly understood our needs in terms of balancing risk with the need for regular income and security, but most importantly has shown immense patience – one of my early statements was that I will listen, but am unlikely to take more than 10% of the advice given! Sufficient to say that this percentage is now much higher and we have a more balanced lifestyle, as well as gradually securing our children’s future"

Dr JB - Chislehurst