A Venture Capital Trust (VCT) is a company whose shares trade on the London stock market. A VCT aims to make money by investing in other companies. These are typically very small companies that are looking for further investment to help develop their business. The VCT often invests at an early stage in a company’s development, so it is a higher risk investment. This means that the VCTs are aimed at wealthier investors who can afford to take a long-term view and accept falls in the value of their investment.
Maintaining your ethical and environmental beliefs
For investors concerned about global warming and other environmental issues, there are a plethora of ethical investments that cover a multitude of different strategies. The terms ‘ethical investment’ and ‘socially responsible investment’ (SRI) are often used interchangeably to mean an approach to selecting investments whereby the usual investment criteria are overlaid with an additional set of ethical or socially responsible criteria.
Safeguarding your money at a time of low interest rates
During these difficult economic times, one of the tools available to the Bank of England to stimulate the economy is interest rates. Lower interest rates mean that it is cheaper to borrow money and people have more to spend, hopefully stimulating the economy and reducing the risk of deflation. This is why the Bank of England has aggressively cut them.
A tax-efficient wrapper surrounding your fund choices
Individual Savings Accounts (ISAs) are not actual investments; they are a tax-efficient wrapper surrounding your fund choices. When you make an ISA investment you pay no income or capital gains tax (CGT) on the returns you receive, no matter how much your investment grows or how much you withdraw over the years.
Investing in a range of funds for the medium- to long-term
Investment bonds are designed to produce medium- to long-term capital growth, but can also be used to give you an income. They also include some life cover. There are other types of investment that have ‘bond’ in their name (such as guaranteed bonds, offshore bonds and corporate bonds) but these are very different. With an investment bond, you pay a lump sum to a life assurance company and this is invested for you until you cash it in or die.
An investment trust is a company with a set number of shares. Unlike an open-ended investment fund, an investment trust is closed ended. This means there are a set number of shares available, which will remain the same no matter how many investors there are. This can have an impact on the price of the shares and the level of risk of the investment trust. Open-ended investment funds create and cancel units depending on the number of investors.
Unit trusts are collective investments that allow you to participate in a wider range of investments than can normally be achieved on your own with smaller sums of money. Pooling your money with others also reduces the risk.
Open-Ended Investment Companies (OEICs) are stock market-quoted collective investment schemes. Like investment trusts and unit trusts they invest in a variety of assets to generate a return for investors. They share certain similarities with both investment trusts and unit trusts but there are also key differences.
Investing in one or more of the four asset classes
Open-ended investment funds are often called collective investment schemes and are run by fund management companies. There are many different types of fund. These include:
A pooled (or collective) investment is a fund into which many people put their money, which is then invested in one or more asset classes by a fund manager.
