Investments

There are so many different types of savings and financial investments that it is wise to seek advice as to which ones to choose.

Investment Success

Sapphire Asset Managements approach to Investment Management is about increasing the probability of investment success by concentrating on those aspects which have the greatest impact on investment returns, namely:

• Strategic asset allocation - determined by your risk tolerance, time horizon and return requirements.
• Diversification -  combining assets with different characteristics within your portfolio, allows you to achieve better risk adjusted returns. Surprisingly adding certain higher risk asset classes such as value and small cap equities, emerging markets and commodities to your portfolio can have the net effect of lowering overall risk and increasing investment returns.
• Maintaining discipline - we will help you stay the course and not be influenced by the short term perspective promoted by the City and media in general.
• Minimising cost - through investing in institutional funds, reinvesting commissions, using tax-efficient 'wrappers' to increase after tax returns; rebalancing infrequently – only when the benefits of doing so outweigh the costs.

Portfolio Building

A portfolio is essentially the sum of all your different investments. These investments will probably include stocks, which are investments in individual businesses; bonds, which are investments in debt that are designed to earn interest; and mutual funds, which are essentially pools of money from many investors that are invested by professionals or according to indices. Building a winning portfolio is dependent on a number of factors but one of the most important steps is properly dividing assets among different investments. Sapphire Asset Management can help you build the right portfolio for you.

Types of Investments

National Savings products

• National Savings and Investments (NS & I) offers a totally safe way of saving and investing money because it's backed by HM Treasury. Some schemes pay interest that is taxable while others have the benefit of being tax-free. Premium bonds don't pay interest but you can win prizes.

Individual Savings Accounts (ISAs)

• ISAs represent a tax-free container into which to place cash savings and investments in equities, bonds, collectives (see below) and insurance policies.
  The cash portion, currently up to £3000 per year is usually a deposit with a bank or building society and because it is an ISA, interest is not taxable.

  MAXI ISA	MINI ISA
  Stocks & Shares - up to £7,000* Cash - up to £3,000	Stocks & Shares - up to £4,000 Cash - up to £3,000
  *If the maximum amount is invested in this component then no more money can be invested in the other component in that financial year.

  
  

  When the maximum allowance has been invested for one financial year individuals are not able to invest any more even if a withdrawal has been made.
  
  For example, A Cash ISA is opened and £2,000 is invested at the start of a financial year, the maximum amount that can be invested over the remainder of the year is £1,000. If a withdrawal of £500 halfway through the year is made, the maximum amount that can be invested is still £1,000 not £1,500. Providing no more withdrawals are made and the remaining maximum investment is made, the balance at the end of the year would be £2,500. The total amount of money invested into a Cash ISA each year is £3,000 regardless of the number of withdrawals made.

Equities

• The term, Equities refers to shares of stock in a company. There is a risk attached to this form of investment as the value of your investment can go down, but the upside to this is that with the right financial advice you can stand to make an excellent profit on your investment.
• You have the possibility of gaining not only a dividend - a proportion of the company's after tax profits distributed to shareholders - but also a capital appreciation. If the price of the shares goes up after you buy them then you have made, on paper at least, a capital gain.
  

Collectives

• The basics of collective investments are simple enough and make a lot of sense.
  The idea is that by gathering up cash from a large number of investors, a fund manager can invest in shares, bonds, the money markets, government stock, even unlisted companies and spread the risk for them.
• The investors, many of whom may not have very much money to invest, can benefit from being part of the bigger fund, which has the muscle to buy at the best rates. In the UK there are a number of ways to invest in collective funds. They differ one from another and it is worth knowing how they work to decide which is the best to go for.
• What are Unit Trusts / OEICs?
  
  Unit trusts and open ended investment companies (OEICs) are collective investments, which allow individual investors to pool their money into a fund which is then invested in a wide range of shares or fixed interest stocks.
  
  The number of companies and securities invested in should be greater than an average investor could achieve cost effectively through a portfolio invested directly in stocks and shares. The fund is then professionally managed to achieve maximum returns consistent with the stated investment objectives of the fund.
  
  Collective investments can provide clients with expert management and an opportunity to reduce risk through diversification. They offer suitable investment opportunities for most investors by allowing access to an extensive range of funds all with different aims and objectives.
  
  Unit Trusts
  
  A unit trust is a fund of stock market investments divided into equal portions called units. The price of units is calculated regularly, normally on a daily basis and is governed by the value of the underlying stocks and shares in the fund. This price will rise and fall with movements in the price of those stocks and shares. There will usually be two prices quoted for such units, an offer price and a bid price. The offer price is higher than the bid price, normally by 6-7% and is the price the investor pays to buy the units. The lower price, the bid price, is the price that an investor would receive when selling the units. This difference represents the charge made by the fund manager and the costs incurred in buying and selling shares within the fund.
  
  Open Ended Investment Companies (OEICs)
  
  OEICs are a new form of pooled investment introduced into the UK in the first half of 1996. They were largely introduced as a more flexible and simplified alternative to the established vehicle of unit trusts and unlike unit trusts, they can be marketed anywhere within the European Union. They are in fact very similar to unit trusts and are managed in the same way. However, instead of buying units, the investor buys shares in the OEIC and the value of these shares is directly linked to the value of all the assets in the fund. Instead of a bid-offer price structure the shares are quoted on the stock market at a single price to which buying or selling costs are added.
  
• Unit trusts, investment trusts, OEICs - confusing or what? The following explains what they are and why they can be worthwhile investments.
• Unit trusts and investment trusts are not the only ways for investors to indirectly buy a wide and professionally managed basket of shares and other assets. The latest kid on the investment block is the OEIC - pronounced 'oik'! It stands for Open-Ended Investment Company and is a new type of fund, designed to make investing even easier. Several big unit trust groups have already converted their trusts into the new structure.
• OEICs issue shares, rather than units, to investors, but, as with unit trusts, they can issue as many as they like and the share value will depend on the value of the trust divided by the number of shares issued. There is only one price for OEIC shares, rather than the two buying and selling (offer and bid) prices quoted for unit trusts. This makes it easier to see how much your holding is worth.
• Many OEICs are set up under a clever umbrella structure, offering a wide range of sub-funds. The idea here is that if you invest in one, you can easily and cheaply move your money to another with a different investment aim whenever you want.
  
  

  Because these investments may go down in value as well as up, you may not get back the full amount invested, especially if you withdraw from it in the early years. These are intended as medium to long-term investments

If you require more information, contact us on 01483 212957