Types of investment

Because we all have different aims and goals, there’s no ‘one size fits all’ approach to investing. You should choose the investment types which fit with your investment plan – what you want your investment to achieve and how long you want to invest for.

These are some of the most common types of investments available today:

Cash

Any investment made in cash, such as a bank or building society account, or a Cash ISA. These are usually short-term (less than 5 years) and often offer instant or easy access to your money.

Because cash investments are lower-risk, they don’t offer the same potential returns as other types of investment, over the medium-long term. Your money is secure but there’s a real risk it will lose value because of tax inflation.

Bonds and Gilts

These are effectively ‘IOUs’ from the Government or big companies. When you buy a Corporate Bond or a Government ‘Gilt’, you’re basically lending to them, and earning yourself a fixed rate of interest in return.

Gilts are backed by the state and are as good as guaranteed, Corporate Bonds (from companies) carry a degree of risk, but offer a higher potential return.

Shares

Sometimes known as ‘equities’, investing in shares basically means investing in the stock market. You can do so directly by buying shares in particular companies, or indirectly by investing through a professionally managed investment fund, such as a unit trust.

There are a wide variety of unit trusts available which have different objectives and different levels of risk and reward.

Property

Your home is an investment, but did you know you can also invest in property either directly as a buy-to-let investor, or indirectly through an investment fund which invests in properties around the world.

Either way, investing in property exposes you to more risk – property prices can fall as well as rise – and it may also take longer to sell property. You should seek advice before investing in property.