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Investment assets.

Investment assets are what you invest in. You can either invest in them directly or you can invest in them through an investment fund such as a unit trust.

Each type of asset has its own characteristics and also has different risks associated with it.

Main types of investment asset

Equities

Shares, also known as 'equities' buy you a small part of a company. This entitles you to a share of any profits the company makes. If the company is seen to be successful their shares may be wanted, pushing up the share price. Share prices do also fall.

Shares:

  • can be highly volatile in the short term
  • can offer excellent long-term growth potential
  • are only suitable for medium to long-term investments – at least five years, preferably longer.
  • have the additional benefit of dividend payouts, the value of which may fluctuate.

Equities can invest in the growth potential of the UK, Europe, USA and the rest of the world.

There is no set maturity date. You can stay invested for as long as the company has shareholders. Lots of choice means it's possible to invest tactically in line with your objectives and timeframe.

The value of equities is not guaranteed and may fall as well as rise which could mean you losing some or all of your money.

Fixed interest securities

Fixed interest securities are more commonly known as 'bonds'.

All bonds are basically IOUs – a promise to pay back your original investment at a set date in the future, plus payments at regular intervals between now and then. Some bonds are index linked and increase in line with inflation.

Bonds:

  • particularly suited to providing an income.
  • are a fixed term investment – bonds end on a pre-agreed date in the future.
  • often provide more modest returns than equities but tend to be less volatile over the short to medium term. This can be advantageous when stock market values are falling.

Bonds can be corporate bonds, issued by companies to raise money, or government bonds. UK government bonds are sometimes referred to as gilts.

Returns can come in two ways:

  • income is provided by the issuer over the lifetime of the bond.
  • bonds, like equities, can be traded so you can also achieve capital growth by selling a bond during its lifetime for more than you bought it for.

The value of fixed interest securities/bonds is not guaranteed and may fall as well as rise which could mean you receive back less than you originally invested.

Commercial property

In investment terms, property means commercial property such as offices, shops, warehouses, factories, leisure facilities and other business buildings.

Property:

  • can offer good prospects for long-term returns. Rental agreements produce a steady income stream
  • values do not always mirror stock market values. This can be advantageous when stock market values are falling
  • can be difficult or take time to sell, so you can't always trade when you want
  • values are a matter of the valuer's opinion rather than fact.

Returns from commercial property can come in two ways:

  • from rent paid by tenants
  • from increases in the market value of the property itself.

The value of commercial property is not guaranteed and may fall as well as rise, which could mean you receive back less than you originally invested.

Cash

You may not think of cash as an investment but it's an important asset in its own right.

Although the returns from cash are generally lower than other asset classes over the long term, it has a number of useful attributes.

Cash:

  • can offer capital security like bank and building society accounts.
  • can at least produce some returns when stock markets are falling although potential returns are limited.
  • adds flexibility and stability to mixed funds that invest in other assets.

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