Comparing investment products

When you compare investment products, you should consider two key factors:

  • Risks involved – most investments do not give you a capital guarantee. How much of your original capital could be at risk? Is there a risk of poor returns? Is there inflation risk?
  • Likely return – risk and return go hand in hand, so, as a general rule, the lower the risk, the lower the rate of return you should expect. With longer-term and higher-risk products, you can expect higher returns, but this is not guaranteed and you could lose some or all of your money. You need to carefully consider the effect of this on your financial situation.

You also need to consider how long your money will be tied up for.

When you compare investments, look at:

  • The minimum investment amount – can you top up your investment without having to take out a new product and pay full charges again?
  • The minimum recommended investment term for your money
  • Access to your money – are there penalties if you withdraw your cash early?
  • What fees and charges apply, as these reduce the value of your investment

You can get information about investment products directly from many banks, life assurance companies and investment firms. Financial advisors, including brokers and tied agents, also advise on and sell these products on behalf of the main providers.

These products are more complicated than savings and deposit accounts, so consider getting professional financial advice. Make sure any advisor you use is authorised to give investment advice and get the most from any financial advice by asking the right questions.

Before you choose an investment product, ask:

  • What balance of risk and return are you looking for? The higher the risk, the higher the potential returns should be.
  • What is the minimum recommended term of the investment? If it’s a long-term investment, can you afford to tie up my money for that long?
  • Will you have to pay additional charges if you withdraw your money early?
  • What are the charges? How much would your investment have to grow each year to cover charges?
  • How much of your original investment is secure, if any? If the product includes guarantees, what exactly do they cover and what conditions are attached?
  • How much tax will you have to pay on your return?
  • Could you get a more definite return elsewhere for the same lump sum and term?
  • What happens to your investment if you die?
  • How can you find out how your investment is performing?
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