Lesson 8 Flashcards
What is a ISA
A cash ISA is a savings account where as your money grows you don’t pay tax on the interest you earn
What are the 4 types of ISAS
Cash ISA.
Stocks and Shares ISA.
Innovative Finance ISA.
LIFETIME ISA.
What are the advantages of ISAS
Wide investment opportunities.
Tax-free withdrawals.
What are the disadvantages of ISAS
Currently ISAS have a cap of 20,000.
Money which has been withdrawn can’t be replenished.
What are bonds
This is essentially a loan taken out by a company.
How are bonds sold by a business
The company sells the bonds to their investors. In exchange for the capital given to the business, they pay a interest coupon which is an annual rate payed to the bond.
What are the advantages of bonds
Provides a predictable stream of income.
There is a predictable interest rate applied.
What are the disadvantages of bonds
In comparison to stocks, there is a low rate of return.
Bond prices fall when interest rate increase.
Long terms bonds suffer from price fluctuations as interest rates rise and or fall
What are stocks
Buying a share/portion of a specific business. This allows them to become a partial owner of the business claiming a portion of company profits
What are the advantages of investing into stocks
Investors are provided with dividends.
There is no fixed interest rate, therefore more money can be created due to the value of your stock.
Investing into multiple businesses allows for diversification and spreading cost
What are the disadvantages of investing into stocks
Stocks fluctuate quite rapidly.
Stocks are consisted of stock fees and commissions which consume parts of your investment
What are premium bonds
Investment products which are issue by National Saving and Investment
What are the advantages of premium bonds
No investment risk.
No additional fees.
Bonds can be sold at anytime.
Overall, money is protected.
What are the disadvantages of premium bonds
No interest applied.
Low odds of actually winning.
No longer a unique source of income
What are pensions
These are a type of retirement income that is planted throughout your life
