Shares are one of the four main investment types, along with cash, bonds and property. They carry risk, but they can offer the highest returns. Here you can find out what they are, how to invest in shares and what risks are involved.
What are shares?
- Shares (also known as equities) are like tiny fractions of a company. If you own one, you own a little bit of the company and a proportion of the company’s value.
- You can own shares yourself, or you can pool your money with other people in a collective investment often known as a fund.
- Funds buy a selection of shares, which are chosen and managed by a fund manager. If you put your money into funds, you don’t have to do the work of choosing the individual investments.
- When you own shares directly you become a shareholder, which usually means you have the right to vote on some company decisions. This doesn’t happen if you invest in a fund.
- Shares are bought and sold on the stock exchange.
ISAs can be used to hold stocks and shares or cash, or any combination of these, up to the current annual limit (£20,000). An ISA is a financial product that can be used to help save you tax.
When might a Stocks and shares ISA be for you?
A Stocks and shares ISA could be for you if:
- you are happy to put your money into investments but want to protect any profits or interest from tax or to protect dividends from higher-rate and additional-rate tax (as dividends are taxed at 10% – however this provides no benefit to basic rate taxpayers)
- you aren’t looking for immediate access to your money and are prepared to keep your money invested ideally for a few years, although this will be a personal decision.
- you haven’t used up your total ISA allowance for the current tax year
- you’re comfortable with the fact that the value of your investments can go both up and down and that you might get back less than you invested.
Self-invested personal pensions allow a wide range of investments.
How self-invested personal pensions work
Self-invested personal pensions (SIPPs) are a type of personal pension. They are an agreement between you and the pension provider. However, with SIPPs you have more flexibility with the investments you can choose than for personal pensions.
With a SIPP you can invest in a wider range of investments, including:
- Quoted UK and overseas stocks and shares
- Unlisted shares
- Collective investments (such as OEICs and unit trusts)
- Investment trusts
- Property and land (but not most residential property) insurance bonds.
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DATE OF OFFER 22nd March 2015
THIS OFFER HAS NOW EXPIRED 1st AUGUST 2017