Lump Sum Investment

Spend it, save it in a bank account where it's safe - or invest it where it has more opportunity to grow? There are lots of instances where we might find ourselves with some extra money – even quite a large lump sum – and although the first thought might be ‘what can I buy’ – it would be sensible to think ‘what other options do I have?’

For most of us, we do consider what kind of risk we are prepared to take – and what we mean by risk can vary dramatically from person to person. There are many types of risk and some or all might affect any kind of investment we consider.

To find out more about Lump Sum Investments and to get the professional advice you need, please call us on the phone number above or complete our enquiry form below, and we'll call you straight back. We're ready for your call.

Investment Risk
If you decide to invest your money, you should be aware of all of the risks involved. There's often no guarantee that you'll make any money or even get back the amount you invested in the first place.

Investment plans normally invest in one or more types of asset classes (such as equities or bonds) and the level of risk involved usually depends on what asset class or range of assets you're invested in. But within the same asset class there can be different risk levels. For example, the shares of large companies are generally considered to be less risky than the shares of smaller companies.

Currency risk
If you invest in funds that aren't denominated in sterling, the value of these funds will also go up and down according to changes in exchange rates.

Reducing the risk
Some investment plans are designed to reduce risk. They can do this in a number of ways, such as investing in a broad spread of asset classes or only investing in those asset classes with a lower level of risk.

It's up to you to decide on the level of risk you're prepared to take. Our advisers will discuss in detail what kind of investor you are and what levels of risk you are comfortable with, before making any investment decisions.

Why should you Invest?
If you decide to invest your money, rather than leaving it in a bank account, usually depends on your attitude to risk but it will also depend on how much access to your money you need.

If you're risk averse, and want to get your hands on your money at short notice, you could be better sticking with a savings account. But if you're looking for a bit of investment variety, and the potential for higher growth, there's a range of investment products for you to choose from.

There are generally two main reasons why people invest - to let their money grow or to use their investments to generate an income. What is Investing for growth?

Investing your money for growth means aiming to achieve the best possible return on your investment, but this must be consistent with the level of risk you’re prepared to take. There are funds, for example Equity funds and commercial property bonds are generally considered to offer the greatest opportunity for growth.

Many investment products allow you to structure your investment to match your risk profile by investing in a balanced portfolio of equities, government and corporate bonds, property and cash. Your Independent Financial Adviser will advise you on an appropriate spread of investments. What is investing for income?

There are many instances where you may wish to get an income from your lump sum or investment. Typically, this means looking for an investment which pays out regular amounts without too much risk to capital.

There are many options for example Cash deposits and government bonds which can be used to generate income payments. Cash deposits give little or no investment risk, while government bonds are considered to be low risk investments.

What are the Asset Classes available?
Cash
Cash is generally considered to be the safest of the asset classes. Cash funds pay a rate of interest which can go up and down daily. Cash funds are often invested in bank deposits and are generally regarded as safe. However, the returns you receive might not be very attractive over the long term.

UK Goverment bonds
These are sometimes called gilts or gilt edged securities, and are loans to the UK Government. The UK Government (as the issuer of the bond) agrees to pay a fixed rate of interest and to repay the loan at the end of a fixed term. UK Government Bonds are relatively secure since the interest rate is fixed. However, the actual price of the bond can go up and down.

Corporate bonds
These are similar in structure to government bonds but they're issued by companies. These are generally riskier than government bonds but carry the potential for higher returns.

There are different categories of corporate bonds. Investment grade bonds are judged to be very likely to meet their payment obligations. Riskier high yield, or junk, bonds are not.

Equities
Often referred to as stocks and shares, these are shares in companies. Shares are traded on stock markets and the share price can go up and down on a daily basis. Companies usually pay a dividend to share holders.

Equities are generally considered to be the riskiest mainstream asset class. Overseas Equities provide some spread of risk but add currency risk.

What Investment Products are available?
Individual Savings Accounts (ISAs) Stocks and shares ISAs let you invest up to £10,200 a tax year. You don't pay any personal tax on the growth in value of an ISA.

Investment trusts These are companies which exist solely to invest in the shares of other companies. Shares in investment trust companies are traded on stock markets. Returns on these investments are normally subject to capital gains tax.

OEICs (Open Ended Investment Companies) These are a type of collective investment scheme and fund management companies usually run them. Your investment buys you shares in these schemes. The price of the shares can change daily, up or down, according to changes in the value of the assets they're invested in. One advantage which OEICs have over investment trusts is that they can invest in different asset classes such as bonds and property. In this way they can spread the investment risk. Returns on these investments are normally subject to capital gains tax.

Investment bonds These are really life assurance plans with a large investment element. Like OEICs, they give you the opportunity to invest in a range of asset classes at the same time, spreading your investment risk. Returns on these bonds are normally paid net of basic rate income tax.

Structured products These are usually fixed term investment products which offer performance related to equity returns but aim to provide protection of the original amount invested as long as you keep your money invested for the full term. Returns on these investments are normally subject to capital gains tax.