What are the main Investment types?

When considering investment types. It's crucial to assess your attitude to risk, investment objectives, and time frames. To create a diversified portfolio that aligns with your financial goals.

Investments come in various forms. Each with its attributes and potential benefits. Here are some common investment types:

Collective investments

If you're keen to make a broad range of investments. However, don't have the time or expertise to pick your portfolio. A collective investment could be a good option for you.

With this, you diversify your funds over multiple assets and with other investors

Open-ended investment company

An open-ended investment company (OEIC) allows you to pool your funds with other investors. This means you can invest in assets that would be difficult to invest in alone. The performance of the investment affects the share price. Different OEICs have different risk levels and returns. The fund manager calculates the value once a day.

Unit trusts or funds

If you invest in a unit trust, an experienced fund manager run your funds. The manager picks assets. Choosing on their view of which investments will perform the best to reach their goal. The manager calculates the value once a day.

All investment types carry risks. So, it's always best to speak to a financial advisor first. We have a range of financial advisors here who specialise in investments.

Exchange-traded funds

It's similar to unit trusts or an OEIC. Although, the value goes up and down throughout the day, like a stock or share.

Commodities

Commodities funds invest in raw materials or agriculture products. For example wheat or gold. Investing in commodities can be high risk. They do not deliver as much growth as securities. The advantage of commodities is that their performance is entirely independent of that of securities. Therefore they help balance portfolios.

Securities:

Financial advice given to a security is seen as a regulated activity. It consists of three asset types: derivatives, equities, and bonds.

Equities or stocks and shares

Also known as stocks and shares, stocks represent a stake in a company. Stocks are bought and sold on the stock exchange; their value fluctuates, losing as well as gaining value. This makes them best suited to longer-term investments, as they are high-risk in the short term.

Bonds

Bonds are essentially loans. Either to the government (government gilts) or corporations, that are paid back over time with interest. They range from low risk to high risk (bonds issued by a company). On average, bonds are lower risk than equities. They tend to provide steadier returns and fluctuate less in value.

Derivatives

These complex contracts, known as futures contracts, options contracts, swaps, and forward contracts. Primarily used to hedge positions. They should be approached with caution and specialist advice. The value of derivatives is based on the performance of another type of asset. For example: stocks, bonds, commodities, currencies, and interest rates.