| One of the undisputed qualities of this country is | | | | is correspondingly lower than investment in |
| the strength, vitality and diversity of its financial | | | | company shares. |
| services sector. This is all very good for the | | | | Indirect investment |
| economy at large, but for the individual investor | | | | The financial investment advice to those investors |
| the sheer diversity of the available avenues for | | | | who want to avoid exposure to the fortunes of |
| investment can be a problem in itself. The market | | | | particular, individual companies is to spread the risk |
| has grown so sophisticated and diverse that | | | | by sharing it, together with other similarly-minded |
| financial investment advice is practically | | | | investors, in a whole basket of varied |
| indispensable, not only to manage the quite high | | | | investments. In this form of collective investment, |
| costs of assembling your own portfolio of | | | | a portfolio of different investments is maintained |
| investments, but also to reduce the risk of | | | | and managed by a professional fund manager |
| making potentially very costly investment errors. | | | | who chooses the range, mix and spread of the |
| The basics | | | | funds various investments. Individual investors in |
| In order to make sense of the plethora of | | | | the fund then share in the spoils - or otherwise - |
| investment vehicles available it is perhaps useful to | | | | of the fund's overall performance. |
| divide them into two basic categories: direct and | | | | Collective, indirect investments such as this might |
| indirect or collective forms of investment. | | | | be organised as unit trusts, investment trusts or |
| Individual securities | | | | as so-called Open-Ended Investment Companies |
| In the former category of direct investment | | | | (OEIC). |
| there are the many hundreds of publicly quoted | | | | Unit trusts and OEICs are, in fact, both |
| company shares or bonds, together with | | | | open-ended investments in that investors can |
| government-issued bonds or "gilt-edged" stock. | | | | freely trade in the units or shares of the funds. |
| These are traded on the stock market, where | | | | The OEIC is frequently described as the modern |
| their price fluctuates according to the laws of | | | | day equivalent of the older unit trust; the unit |
| supply and demand. Favoured securities will be for | | | | trust trades on both an offer and a bid price, |
| those companies that are performing successfully, | | | | while the OEIC trades at a single price. A useful |
| in which case demand will be high, supply short | | | | question to test the mettle of your chosen |
| and the price correspondingly high. Furthermore, | | | | independent financial adviser is to ask about the |
| the dividends to which owners of the relevant | | | | relevance of this price distinction! |
| securities are entitled will also reflect the financial | | | | Financial investment advice |
| performance of the companies concerned. | | | | Although the individual investor might have his or |
| Bonds are effectively corporate or government | | | | her own preferences regarding the spread and |
| loans, with a predetermined rate of interest paid | | | | risk of the investments he or she wants to |
| on the loan and a guaranteed return of the | | | | make, few are knowledgeable (or rash) enough to |
| amount loaned once it reaches its maturity date. | | | | take specific decisions without the support and |
| Generally speaking, therefore, bonds represent | | | | guidance of professional financial investment |
| less of a risk for investors and the rate of return | | | | advice. |