Higher returns generally come with higher risk

It seems incredible that the Bank of England base rate has stood at 0.5% since March 2009. It’s made unhappy headlines for savers looking to generate income over the previous five years.

The reality is that the potential for higher returns generally comes with higher risk. All investments are not equal, and knowing what to invest in, when to invest in it and how much to invest are difficult questions to answer. That why it’s essential to receive professional advice to assess the different options available to you.

The golden rule about not putting all your eggs in one basket is essential – in more ways than one.

Collective investment schemes
One way to gain access to a wider range of assets is to use a collective investment scheme. This allows you to pool together your contributions, and to share the costs and benefits of investing. Typically these collective investments will include unit trusts and investment trusts.

Active and passive investing
Investment funds are either actively or passively managed. In an active fund, the manager uses their skills to pick the best performing stocks to try to beat the index that they belong to. A passive fund simply tracks the index and seeks to match its performance as closely as possible.

It’s important to consider your attitude towards risk and the investments required to help plan for your goals and as your life changes. While you are aiming to beat inflation and achieve the returns you are looking for, you need to think about where you are putting your money.

If you are looking for income or growth, you don’t want that to be eroded by tax – so make the most of tax-efficient savings such as an Individual Savings Account, for example. You can also invest in your pension, which has a number of tax benefits. Other products such as offshore bonds, if appropriate, can also offer tax benefits in certain circumstances.

The value of investments and the income from them can go down as well as up and investors may not get back the amount invested. This information does not constitute investment advice and should not be used as the basis of any investment decision, nor should it be treated as a recommendation for any investment.