Frequently Asked Questions
How much can you save or invest and how regularly?
With most savings and investments, there is a minimum amount you can invest. Sometimes, where there is no minimum amount, some schemes’ charges may still make it uneconomical to pay in small sums.
Where a type of saving or investment enjoys favourable tax treatment, such as an Individual Savings Account ( ISA) the maximum is £7200.00 in the tax year 07/08, of which £3600.00 can be in to a cash ISA.
Certain investment products are specifically designed to accept regular monthly or annual savings, and there may be penalties if you fail to keep up the payments. Regular saving has the advantage of creating a discipline which you might find helpful. It also takes away tricky decisions about when is the right time to buy investments whose price rises and falls, by using pound cost averaging.
For how long can you tie up your money?
Of critical significance when choosing any investment is: when can you get your money back and are there penalties for doing so? Some products are designed to last for a specific period, e.g., 5-10 years, for example. Of course, you should not invest unless you can leave your money for the full period. Other investments do not have a specified term, but they may clearly be best suited to long-term investment, and they be an unwise choice if you know you want to save only for a year or two or might need funds in a hurry.
However sensibly you choose your investments at the outset, life can be unpredictable, so you should check what happens if you need your money back sooner and always hold an emergency fund in an easily accessible account.
What are the costs?
Charges vary a great deal but usually would be one or more of:
- Initial charges on investment
- Annual management fees
- Exit charges on encashment
- Bid/offer spread
What are the risks
Unit trusts, OEICs (open ended investment companies)and investment trusts are all collective investments.
Many providers now offer unit trusts, OEICs and investment trusts. You do not necessarily need to be an experienced investor to consider them as part of your overall investment plan.
They are considered to be a higher risk investment but can be a simple way to achieve a very diverse spread of investments. They pool investors' money together in a large shared fund with a professional fund manager, with the aim of delivering the highest returns and many are accessible for small regular or lump sum amounts.
