Investments explained

Investing usually means saving for the medium to long term so that your money has the chance to grow and beat inflation.

You can invest in all sorts of things depending on your risk appetite and what you want to achieve.

Investment types

There are four main types of investment, called asset classes.

An ‘asset class’ is a specific category of assets or investments, such as equities or bonds. Normally assets in the same class have similar characteristics. They can, however, have very different returns or risk.

Money Market instruments (including cash)

These are bank and building society deposits as well as other instruments such as ‘Certificates of Deposit’ and ‘Floating Rate Notes’.

What’s the potential return dependent on?

The return comes from a combination of any interest received as well as any change in the value of the instrument.

Bonds

Bonds are loans to a government (government bonds, gilts) or a company (corporate bonds), usually for a set length of time.

What’s the potential return dependent on?

The return is a combination of any interest received and any change in the bond’s value.

Property

Property investing includes direct investments in buildings and land, as well as indirect investment in shares in property securities, like shares in property companies.

What’s the potential return dependent on?

The return received from property is a combination of income from rent and any changes in the capital value of the property. In comparison, the return received from property securities can be similar to equities.

Equities

Equities are part ownership in a company, usually known as stocks or shares.

What’s the potential return dependent on?

The return you get is any change in value of the stocks and shares, plus any income from dividends.