There are a few types of investment. Overall however, most investments will fall into the following categories: saving accounts, stocks and shares, bonds, and Premium Bonds. These investments have their advantages and disadvantages.
The first type of investment is that of saving accounts. The saving accounts have a quoted interest rate, which is a percentage return on the deposit that is left in the account. These are paid annually.
Overall, the advantages of the saving account is that there is little to no chance of losing some of the deposit. The interest rate they have provides a guaranteed rate of return. As such, the more you invest the more the returns can then be maximized. In addition to this, saving accounts can be easy access and therefore one of the best investments in this respect.
However, equally there are some disadvantages to this type of investment. One of the disadvantages of this investment is that that they are limited to only the quoted interest rate. During low interest periods these interest rates can generally be low, approximately 1-2% annually. As such, the saving account investment and percentage returns are limited.
Stocks and shares:
The stock and share investment option is one that is based on the stock market. As such, these are more volatile investments and stocks can go up and down. Overall, there are a variety of investment packages for these types of investments.
The advantage of stock and share investments lies in their greater potential returns. These returns depend on how the stocks and the general markets. As such, these investments are not limited to a quoted percentage, and so in the long run at least can provide better returns than saving accounts – particularly when markets are bullish.
The disadvantage of stock and share investment options is that they do not necessarily guarantee returns either and can bring losses. Markets can go down, and in this respect returns are not necessarily guaranteed. In addition to this, stock and share packages may require a certain percentage fee.
The bond is a fixed interest investment. They usually require that a deposit be left for a particular time period. This can be longer than a year.
Overall, the advantage of bonds is that the fixed interest rate is usually greater than saving accounts. As such, they can provide better returns in this respect.
The disadvantage of bonds is that they are longer term investments, and will require that term to be filled. They are not easy access accounts, and if the bond is closed sooner than expected then it will not return the quoted rate of interest.
In the UK Premium Bonds are an investment that has monthly draws. Overall, these can be up to £1,000,000 or much lower. Thousands of bonds can be invested in, and with a larger deposit then there is a greater chance of winning a draw.
As such, the advantages are that Premium Bonds have potentially much greater returns. Up to £30,000 can be invested which will give a good chance of something being returned. In addition to this, the bonds are backed by HM Treasury and so the deposit will always be returned.
However, the disadvantage lies in that there is no guaranteed returns. No guaranteed returns meaning that no prize draws may be happen to be returned. Admittedly, with a larger deposit this is less likely, but a small deposit may not return anything.
As such, these investments have their advantages and disadvantages. Therefore, it is difficult to say which is the best investment option. Overall, it depends on the requirements.