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Investments made clear

When investing, you take calculated risks to increase your chance of getting higher returns on your money, especially over the longer term (money you can afford to tie up for five years or more). This section will explain the most common types of investments, how they work and what you need to think about before choosing one or more. Our jargon buster will explain some of the words used in the world of investments.

What are investments?

There are different types of investments but, basically, you take a risk with your money by investing in assets that could rise or fall in value. There is no guarantee you will make a return on your investment or even that you will get back the same amount you invested in the first place. Investments are different from savings – they are typically designed for the longer term and involve different types of risk.

Before investing it’s usually a good idea to have sorted out your debts, made sure you’ve looked at protecting yourself against unforeseen events — see Insurance, built up some savings, and arranged your pension – see Pensions (your pension is of course an investment itself).

And, once you start investing, it’s highly advisable to spread your risk – don’t put all your eggs in one basket – see Diversification.

Other sources of information

Many organisations provide general information about investments, for example:

  • ‘Introducing investment’ – a booklet from the Investment Management Association (IMA) – see Related links;
  • Investment factline – factsheets covering different aspects of investing in unit trusts and open ended investment companies from the Investment Management Association (IMA) – see Related links;
  • An online guide to investment companies – from the Association of Investment Companies – see Related links;
  • Investor centre – online information at the London Stock Exchange – see Related links;
  • Information on starting and running an investment club – from Proshare – see Related links.

Or you may wish to seek professional advice from a financial adviser, fund or investment manager or stockbroker – see Related links.