Long Term Saving Investments

Before deciding on a long term saving investment an investor should consider the impact of tax, charges and risk.

If you are lucky and have acquired a reasonable sized amount of capital from either an inheritance, a windfall or simply the maturity of various forms of savings then you have a decision to make regarding investing your funds. If you need some of the money in the short term then invest in short term investments however if you don’t need the money invest it wisely in long term saving investments.

Long Term Saving Investments:

Why would someone want to make a long term investment? Perhaps they would want to save for their retirement, or for their children’s school fees, or maybe putting money to one side for their children to start them off in life. Whatever the reason other considerations such as tax implications, transaction charges, risk and ease of funds access must be thought through.

There are several instruments that offer long term saving investments that are low risk and tax efficient.

Individual Savings Accounts or ISA’s are savings accounts which can have two different types of investment: cash and stocks and shares. These are only available to UK residents and have a total limit per year of £10,680 either in shares only, or £5340 in cash and £5340 in shares. There is no tax liability on any earned income on this investment.

Investment Trusts are businesses that purchase and sell shares in other businesses. When investing in an investment trust company, you are made a shareholder of that company. Therefore your shares will fluctuate in value according to the demand for the shares. An investor can invest in shares in a broad variety of different trusts. There is no tax on shares as such but there is on the dividends received and this depends on what rate of tax payer you are. The charges are fairly reasonable at 9 to 10% per annum including the spread.

A unit trust is an investment that reduces your risk of stock market investing through merging your savings with millions of others, and then investing the funds across a wide variety of shares or other forms of investment. They are also very cost effective with low charges and tax efficiencies. However, the best thing about unit trusts is that experienced professionals invest your money and you don’t have to make any investment decisions yourself.

An investment bond is paid for with a single lump sum and is a whole life policy. Profits are taxable if the forex trader is a high rate or even in some cases a lower rate taxpayer. The invested money is used to purchase units in a self selected fund. These funds range from low to high risk.

Before making an investment decision for long term saving investments an investor should check the tax efficiencies of the investment, the per annum charges and whether the investment is high or low risk. Only when the investor is comfortable should the investment be made.

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