Investing In UK
As the country moves towards Brexit in another 150 days, it’s time to reassess how “British” your investments are. Investing in UK, and for that matter anywhere else in the world, is fraught with risks. Nevertheless, it can bring windfall returns as compared to a savings account. Want to know the best way of investing in UK? Here are some tips and investment products that are worth considering.
Investing in UK- Be A Do-It-Yourself
If you have correct and adequate knowledge of how the stock market works and the risks therein, investing in UK should be a cakewalk for you. You can buy shares and create your own portfolio.
This is an excellent practice of buying and selling shares of publicly listed companies after creating your own portfolio. There are two main stock exchanges you can use for investing in UK- London Stock Exchange (LSE) and Alternative Investment Market (AIM). To do this, you can opt for a share dealing account from a broker. Control is totally in your hands and you can choose to get financial advice about share dealing, have no guidance or let the broker do the investing for you. This investment product provides gains either from dividends on shares or profits on the sale of shares at a higher value than purchase.
Investing in UK- Allow An Expert To Do It For You
You could also allow an expert to do investing in UK on your behalf. This leaves your money in safe hands and a fund manager will likely prefer grouped investments. Grouped investments pool your money along with others’. Below are the types of such investments:
This stands for Open Ended Investment Companies. An OEIC gives you the opportunity of investing in UK companies. There’s no maximum limit on the number of shares you can buy. As it’s a grouped investment, you fund manager will add it to money given by others and invest it collectively in a wide spectrum of assets. Another name for this type of investing in UK is diversification. It also means the fund manager can make more profitable investments than you could on your own.
- Unit Trusts:
Unit trusts are another open-ended way of investing in UK. You buy units in the trust. The fund manager pools your money along with other investors’ into one single fund. A number of asset classes in securities are invested in with the fund money. This lets you invest a small amount each month or a lump sum in a unit trust.
- Investment Trusts:
Investment trusts basically make the job of investing in UK a lot simpler. These are publicly listed companies that invest in shares and financial assets of other companies. A fund manager invests many people’s money. Remember that it’s close-ended meaning you can buy only a limited number of shares.
Investing In UK- Tax-Free Investments
It’s not necessary that every investment product has to be taxable. There are benefits to investing in UK like tax-free. For this, you’ve to make use of your ISA allowance. You can do this in two ways:
- Managed ISAs:
Before thinking about this, decide what the purpose of your investment is. Do you want growth or income? Also, how much risk are you willing to take? A fund manager can invest your money efficiently in managed ISAs.
- Self-invested ISAs:
The name makes it clear. All the investing in UK is done by yourself. The choice is on you where you wish to invest your money. This includes funds, bonds, shares or investment trusts.
- Junior ISAs:
Junior ISAs are basically for investing in your children’s name. This helps build up a money pot by their 18th
Investing in UK- Financial Planning for Retirement
It’s advisable to start investing in UK right from a young age to build up a big nest for retirement. You can start putting money into private pension and let it grow in the long run. Private pension is of two types:
- Personal Pension Plan:
Most people invest in a Personal Pension Plan due to three main reasons- they aren’t eligible for pension at their workplace, they’re self employed or they want to create a separate fund. In this, the person who provides you with pension invests your funds.
SIPP is the short form for Self Invested Personal Pension. You choose the funds you want to invest in. It’s a D-I-Y which means that you create, invest and manage it till you retire. There’s a choice of companies and how much you’ll invest in each fund. You could even manage it online.
Investing in UK- Investment Alternatives
Apart from these financial products, there are other alternatives too for investing in UK. These are peer to peer loans and savings accounts.
- Peer to Peer Lending:
This is a type of loan by which you can lend your savings for a fixed return. There are many borrowers of peer to peer loans, yet it’s risky if the borrower can’t pay you back. You simply add your money to a peer-to-peer provider’s website and they lend it to borrowers at a certain percentage of interest. Investing into peer to peer can also be done with the use of an Innovative Finance ISA (IFISA).
- Savings Accounts:
A savings account with a bank is the least preferred mode of investing in UK, but it is a good option for people who don’t understand about investments or want to keep their money safe. You can choose any type of account on the basis of:
The amount of money you want to save
Access to money anytime
How long you can afford to keep your money locked in
If you don’t want to pay tax on savings
Investing in UK- Summary
- Be a D-I-Y Person
- Allow An Expert To Do It For You- OEIC, Unit Trusts, Investment Trusts
- Tax-Free Investments- Managed ISAs, Self-invested ISAs, Junior ISAs
- Financial Planning For Retirement- Personal Pension Plan, SIPP
- Investment Alternatives- Peer to peer lending, Savings Accounts