The Most Common Investments in the UK

investment

In the United Kingdom there are many financial products available for those who want to invest. Each type of financial vehicle has its own characteristics; thus, the choice is a delicate matter, not least because it is always important to carefully assess the risk of losing some of the capital invested. But what are the most popular investments with UK citizens? Let us look at them.

Mutual funds

An investment fund is a type of financial management in which individuals entrust shares of their capital to experts in the field. Who manages the capital declares publicly, in an easily accessible document, which financial instruments he or she will invest the money in. This has given rise to different types of investment funds, which differ in their purpose and return potential. The individual investor can therefore choose wisely which fund he prefers, according to his needs and financial possibilities. In fact, the investor may not be a great expert in finance and markets, but by purchasing shares in a fund he is in fact entrusting himself to a team of experts. It is possible to invest in mutual funds that invest in securities, real estate, or other financial products; there also are closed-end funds, in which the shares are subscribed in a single solution, only to be redeemed after a specific deadline; funds that invest in bonds or indexed funds. The latter can be better understood by reading this article, which describes them in a clearly comprehensively way.

Trading

While in the case of mutual funds it is a credit management company that actually ‘buys’ the different financial instruments available, there are investors in the UK who prefer to do this kind of activity themselves. It is commonly referred to as buying and selling and is a type of investment that anyone can access, although much depends on the type of product being speculated on. Basically, it involves buying an asset and reselling it when its value has changed, thus making a potential profit. One can buy and sell financial instruments, such as shares; however, there are many who prefer to invest in other types of assets, such as real estate, precious metals, or commodities. To take part in this type of investment, it is generally important to have considerable capital at one’s disposal, as well as to follow market trends very closely.

Deposit accounts

A deposit account is a not too high-risk proposition; it is possible to find deposit accounts with guaranteed returns, insured by the FDIC. Those who choose them often do so to preserve their capital over time, without incurring the risks associated with market trends. Every year the yield is calculated on the sums deposited; there are deposit accounts that enjoy tax breaks, as well as offers for young people or those who decide to set up a supplementary pension. As with most low-risk investments, the annual return on deposit accounts is generally not high. It is true, however, that a great number of investors tend to prefer low-risk speculations, which shelter them from potential capital losses.

Certificates of Deposit and bonds

Among the various investment options available in the UK, these two find wide interest from investors. The short term allows the return to be obtained in a short period of time, and then to have the capital available again to reinvest in other instruments. In both cases, to obtain the yield, it is necessary to leave the capital immobile for the entire duration of the investment; moving it or withdrawing it leads to loss of interest and, in some cases, also to having to pay some sort of penalty. Certificates of deposit have an higher return than deposit accounts; however, it is true that over the course of months, one must reinvest one’s capital as soon as a certificate expires. For this reason, those who do not like to follow their investments consistently and carefully tend to dislike them. The same applies to bonds, which generally need to be help until their natural maturity.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.