About risk and return
Risk is about balancing the chance of a loss with the benefit of a higher return over time. Investing tends to work better over the longer term (through the ups and downs of markets) so you should aim to invest for 5 years or more.
Individual equities (shares) usually carry a higher level of investment risk, which often means that the potential for growth is greater, but there’s also a greater possibility that your investment might fall.
Cash funds, on the other hand tend to carry lower risk, but with that comes lower potential returns.
Your tolerance for risk will help you decide which investments to choose.
In setting up your Invest@Work account we will provide you with a small range of investment options to consider, at different levels of risk. These might be helpful to get you started. When your account is open, there are more tools and guidance to help you.
What is a fund ?
Funds are a pool of money which you invest into along with other investors. That money is then collectively invested by a fund manager using their expertise.
This allows you to spread your money across several different investments, without the stress and difficulty of choosing and managing them.
The fund manager will take a fee for providing this service, usually something like 75p a year for every £100 you put into the fund.
What is share dealing?
Share dealing is when you buy or sell shares in a public limited company.
When you buy a share, you become one of the company’s owners and you may be entitled to a share of any profits it makes.
If the company does well, your shares may go up in value because more people want to have a stake in the company. But if the company doesn’t do well, the value of your shares may fall.
What are ETFs and Investment Trusts?
Exchange-traded funds (ETFs) are an increasingly popular way to invest. They track the performance of specific markets or certain types of investments, such as companies that pay a high level of dividend income.
Investment trusts work in a similar way to funds, you invest in the trust and the trust invests in other investments. Where they differ is that investment trusts are publicly listed companies traded on the stock exchange. If you buy shares in one, you become a shareholder, giving you a vote on how it’s run.