Investments
Individual Savings Accounts (ISA’S)
The individual savings account (ISA) was launched by the government to encourage people to save for the future. It is effectively a tax-efficient wrapper in which you can hold either stock market–based investments or a traditional savings account.
As an incentive, any interest earned on savings or bonds and any capital gains made on investments held within an Isa are tax free. This is particularly good news for people on higher incomes who are taxed at the rate of 40% on all their savings and investment income.
Isas replaced personal equity plans (Peps) and the tax exempt special savings accounts (Tessas), which closed to new investors in April 1999.
There is a limit on how much you can invest each year. Isas come in two sizes, maxi and mini, and there are rules surrounding how much you can invest in each.
To speak to an independent financial advisor, without obligation, contact us via the enquiry form or call us on 07900 800 545.
Unit Trusts
Unit trusts are collective funds which allow private investors to pool their money in a single fund, thus spreading their risk, getting the benefit of professional fund management, and reducing their dealing costs.
They are open–ended which means that the trust can issue new units in response to demand. This means that unit trusts trade at their net asset value – that is the value of their underlying assets divided by the number of units in issue. Contrast this with investment trusts, which are closed funds. Their share prices are affected by market forces and often trade at a substantial discount to net asset value.
Different trusts have different investment objectives. Some invest for income, some for growth. Some invest in small companies, some in large. Some invest in the UK, some in other territories. As an investor you can choose the trust that matches your interest and objectives.
Investment decisions are made by professional fund managers appointed by the trustees. These managers make annual charges.
Every day the trustees compute the value of the trust, divide it by the number of units in issue, and produce a bid and offer price based on that calculation. Unfortunately, when you invest in a unit trust, you usually never know the price you will be charged for units until the next valuation point, typically midday the following day.
Unit trusts are well suited to regular savers who want to drip-feed money into the market every month. With unit trusts, you can invest as little as £50 per month, averaging the acquisition cost of your shares over many months.
Many unit trusts make an initial charge when you invest, and their management charges are deducted from fund income.
To speak to an independent financial advisor, without obligation, contact us via the enquiry form or call us on 07900 800 545.
You will be referred to Laurence Hopper, an Independent Financial Advisor who is regulated by the Financial Services Authority.