Servicing -investments Flashcards
Savings
Regular - out at side into regular lump dumps. These can be used for houses and cars
For Houses there can be multiple forms.
Lump sum - come about firm money that has been accumulated over time inheriserer or arisen as a result of a windfall the phrase lump
Sum investment is used. They may want to provide real growth above the rates of inflation. An alternative would be to convert it at some time in the future into a regular income for retirement or other reason
Investment
Long term - I’d .1.5 years plus’s and the longer the term of the savings the more important it is to maintain and build the value.
Medium - this covers 5-.1.5 year periods and there will be some
Overlap with short term investment such as where a saving for a child or a cruise.
Short - immediate this to have a pot. Credit cards are good at having access to instant access cash. Can include holidays deposits and requirements for 5 years.
Prorities - paying expensive debts, emergency money and protection. This should be up two half of annual
Expenditure or 10% investment
Savings account
- minimum deposits
- notice periods
- additional bonuses
- restricted access
- how the account is accessed
- the way interest added
- help to but ended in 2019
- £5,000.00 savings rate band after then it’s all taxes based on income - £500 higher rate allowance of saving Normal rate allowance is £1,000.00 none for additional.
Savings certificate is free
Deposit based savings
Used for short medium and long
- emergency - have a specific role in planning to ensure that there is always morgue available.
-Short-term - deposits are the only ones that maintain a rate
- inflation erode investment returns in the longer term but over the the short term the main
Equity investments
There are for types of investments
-cash
- bonds
- property
- shares
Investors use it in the short term for speculation they use a high risk one and smit should only be traded by experienced investors
They use it in the medium term in order to get increases dividends this is not likely though so shouldn’t be used primarily. They should always be using other forms for the main goal
- asset allocation - sharing the asset allocation with cash/ bonds increases the diversity and lowers the risk.
- real growth - investing in companies that sell goods and services mean that as inflation goes up so should their price and the companies profits. This helps with the day to day cost of living.
Equities outperform deposits and fixes interest as they help with the ups and downs of the market over a long period so they can be used for people at the start of savings for a pension.
Securities and corporate bond
- they are used to keep pace if inflation
- the bonds are Blaine at a nominal value form corporation or the government and then traded on the bond market.
- there is a risk that the company consonant could collapse if it’s a corporate one.
- the gilts tend not be as risky as the UK is thought to be able to pay the money back.
- index linked fixed interest is when interest and coastal it linked to the RPI. Most corporate bonds are not like this and the government ones link it to RPI. These index linked bonds offer the solution of inflation as investors can be sure that they will keep up with inflation
- there will be a balance of the value between a stock paying a percentage over inflation at say 2% with inflation at 2.5% and a normal foxed interest stock paying 5% so they are not always the best. Could get a savings from a bank with 5.5%
- UK inflation is changing from RPI to CPI meaning that it will offer lower rates.
Use of fixed interest investments
- they are considered low risk
Usually clients use them in an Leif or into trust rather than individually as they still need to take care
Strategic bond funds are popular which is where the IM decided kn the proportions of the above assets which essentially enables the bond to fund to Asia or to changing market and economic conditions.
- some are junk bonds where they are high return and high risk.
1 they can be used short term directly or as part of a pooled investment
They can be mediums and used in their own right and are usually as part of a strategy
Long term fixed interest investments are used in a number of bigger length strategy in a number of longer term investments
Property investments
- provide income
- stable
- can be hard to sell in letting
- prices can go up and down
- they are illiquid
- direct is quicker
Derivatives
- assets
- unlikely to be invested in directly but part of the pooled asset veichle
- a right or an obligation to but or sell another type of asset such as a share fixed interest investment or a commodity - a specific price to someone else at a specific future date.
- the specific orice may turn out to be higher or lower than the market price at that date
- futures and options are one
Contracts for difference
- CFDs are contracts staging eBay one fo the two parties will pay the other the difference between the current value of an asset and its value at a later date.
- if the difference is listjove then you make a profit but if negative rhan you could loose your money and have to pay the other party value.
- CFD - spread bet
- structured products are usually only able to be bought and sold at a limited time. After then they are tied up for 1 - 10 years. Some offer full partial or no protection.
ISAs
- £20,0000 a year
- can have different ones
- can have more than one with different providers.
- can put them in a LISA / innovative finance ISA but LISA have to be 39 and below.
- minimum in age for stocks and shares is 18
Innovative ISA is a peer to peer lending platform revive their interest tax free
Open ended
- increase the number of shares
- they are pooled
- inevsters hope value will go up and may get a dividend
- life offices run open ended life funds that are linked to their investment bond products
Pooled investments
- expertise
Spreading risk - reduced costs
-choose - administration
They can be open ended investment trusts endowments pensions
Passive - uses tracker funds such as the dow jones they may choose to but the quiivalent amount of shares
Investment trusts
- these are closed ended the number stays. Unlike unit tusts and OEIC
- when demand is high the value is said to not be a dicoisnt but a premium
CTFs
Investors could start a savings or investment account for their child using the governments scheme and money. They get an initial investment
- cash stocks and shares and stakeholder:
- stake holders risk has been changed now
- new stopped in 2011
