What sort of investments are there?
Investors can choose to buy investments directly or indirectly. When you directly buy an investment you own the underlying asset, such as a share or bond. Indirect investment is where you buy the underlying asset through a ‘tax wrapper’ like an individual savings account (ISA) or pension. We recommend that you speak to a professional adviser first before you make any investment – particularly those that carry an element of risk.
There are a range of savings accounts available. Generally you achieve a higher rate of interest the longer you commit to not accessing your money.
Fixed interest securities
This asset class includes corporate and government bonds.
A bond is like an IOU. When you buy a bond you are effectively loaning your money to an institution for a period of time.
Providing the institution doesn’t default the loan is repaid at the end of the term. You will also receive interest from the bond. Interest you receive from the bond is called a coupon and is often paid semi-annually.
Property investment can include a buy-to-let flat, or a commercial property like a shop or factory. Property is one of the most 'illiquid' forms of investment as it can take some time to buy and sell. So if the markets move quickly, it can be more difficult to adjust your exposure when compared to against other asset types.
When you purchase an individual share you are becoming a part owner (shareholder) of that company. As the company grows in value your share is worth more. However there is a risk that the value of shares can go down as well as up. Additionally, some companies distribute some of their profits each year called a dividend.
Investing into a commodity is owning raw materials that are either consumed or used to build other products. There are several ways to purchase a commodity, the most common method of direct ownership is purchasing raw materials such as precious metal bullion, for example gold.