Overall, there are various ways that capital can be invested. Various investment options come in different shapes and sizes, with some providing guaranteed returns while others do not. These are a few of the different ways that capital can be invested.
The saving account is a type of investment that has guaranteed returns. Such returns are the quoted interest rate, which is an annual percentage return in relation to the investment. As such, most saving accounts provide an interest rate between 1% – 5%. Such interest rates can be either fixed or variable, with fixed interest remaining the same for the specific period. In addition to this, there are also tax-free saving accounts, such as UK Cash Isas, which are tax-free investments. Therefore, saving accounts are a preferred investment option for many who have large deposits, as the larger the deposits the more interest will be generated. However, not all saving accounts are easy access and so may require no withdrawals for a period.
Stocks and shares:
Stocks and shares are a big type of investment option that are based on stock trading. As such, the value of such investments can go up as well as down. In this respect, stocks and shares can provide potentially greater returns that any saving account. However, not all guarantee returns, although the general trend of stocks is upward, during recession stocks and shares can be weak investments. Overall, there are many different types of stock and share packages and investment funds, whereby expert investment providers may require a small percentage fee for their investment services. As such, stocks and shares can be a good long term investment option, but in the short term may not always return great dividends.
The bond is another way that capital can be invested. Bonds require a more specific deposit to be made than saving accounts, and also over a more specific time period. Then, they provide a fixed interest return which is usually higher than average saving rates. However, bonds are not usually easy access, and closing bonds early may impact the quoted fixed interest return. Overall, they are good longer-term investments, but may not be ideal for those looking for a short-term investment option.
In the UK there are also Premium Bonds which are not the same as the above mentioned bonds. These are backed by HM treasury, had provide returns with monthly bond draws. These monthly bond draws can return up to £1,000,000 or a much more likely £50. The more bonds that are invested in, the better the returns will likely be. Overall, up to £30,000 can be invested in Premium Bonds. As such, Premium Bonds have potentially greater returns that more standard saving accounts – but it is more of a lottery. However, the full original deposit is always returned.
Real Estate investment:
This type of investment involves the purchase of real estate. Then the real estate can become rental apartment or sold on. As such, it is not an investment option provided by banks but by real estate firms. Overall, this is not the cheapest of investment options, but nonetheless is a good one.
These are a few of the different ways that capital can be invested. They include saving accounts, Cash Isas, stocks and shares, bonds, real estate, and Premium Bonds. Such investment options have their advantages and disadvantages, and provide variable returns.