Unit Trusts, Investment Trusts & Capital Investment Bonds
Capital Investment Bonds
A Capital Investment Bond is an investment product which aims to give your money the potential to grow in value over the medium to long-term. In addition, you can also choose to take an income from your plan at any time.
There’s no set term on a Capital Investment Bond. But it should generally be thought of as a medium to long-term investment, taken out for at least five years. Some of the key features include:
- A wide choice of investment funds through different fund managers.
- It can also be used to take an income.
- The minimum single payment is typically £5,000 (or £10,000 should you wish to invest in a Distribution Fund and take a monthly income).
- Up to 5% tax deferred withdrawals can be taken (this applies until the total you’ve made equals the original amount you invested. After this the tax allowance stops).
- Additional investments can be made at any time (subject to any maximum age limit and a minimum investment of £1,000 each time).
Unit trusts and OEICs
Unit trusts and Open-Ended Investment Companies (OEICs) allow you to invest in the stock market. This means you can spread your risk and benefit from expert investment management. Both are regulated by the Financial Conduct Authority (FCA).
Investment trusts
An investment trust is simply a company that’s been set up to invest in shares of other companies.
By buying shares in an investment company, the investor is basically spreading the risk that would normally by associated with a single share investment. That’s because the value of the Investment Company’s shares is directly related to the spread of investments it’s making.
From a tax perspective, investing in investment trusts is treated the same as investing in shares.
Other forms of investment…
Corporate bonds/Fixed Income investing
Corporate Bonds are a cheaper form of borrowing than a bank loan. And they often offer better returns than Government Gilts. That’s because the risk of a corporate company going bankrupt, even a multinational one, is greater than the risk of a Government being unable to repay its debt.
Corporate Bonds are usually invested into by fund managers and other ‘professionals’. And, as per Gilts, they usually do this to produce income and/or spread risk.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
Savings & investment articles
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