Savings Investments

Savings investments can take many forms, but besides property investments, shares, unit trusts and investment trusts are the most common medium to long term savings products. These types of investments usually have higher returns than other products, but also have higher risks so getting investment advice from professionals before investing your money is advisable.

Shares
Buying shares in a company essentially means owning small parts of that company. You can buy shares in companies already listed on the stock markets or you can buy private shares in smaller companies not yet listed.

You can make money from shares in two ways:

1) You can sell your shares at a profit when the share price increases. A company’s share price usually increases when the business is doing well and falls when the company is struggling. Buying shares and then selling them at a profit is how most people try to make money on the stock markets.

2) Companies that do well earn profits which are then passed on to shareholders. These dividends are directly dependent on the company’s profits.

You can buy shares through a stockbroker either directly or via a financial advisor. The level of involvement in the process can vary, but typically a stockbroker will offer one or a combination of the following services:

• Advisory: they will provide advice on which shares to buy
• Discretionary: they will make decisions and buy shares on your behalf
• Execution: you tell them what to buy or sell without their advice

You can deal with a stockbroker face-to-face, over the phone or via the internet.

Unit Trusts
Unit trusts are a collective form of investing in shares. Essentially a fund manager purchases shares in various companies and creates a fund with these shares. Investors then buy units in this fund. Unit trusts spread the risk of investing in the stock market.

These funds have their own strategies and associated risk. For example a fund that focuses on small start-up companies would have higher risk and higher potential earnings than a fund that concentrates on big, established companies.

You are able to buy shares in unit trusts via the fund manager. The value of these shares depends on the value of the underlying shares and so does the amount of dividends earned.

Investment Trusts
Just like unit trust funds, investment trusts buy shares in various companies. However, you as an investor buy shares in this investment company instead of buying units of a fund managed by the company. Shares in an investment trust are affected more by the supply and demand of these shares, making prices fluctuate more than unit trusts. Just as with unit trusts, the investment goals and strategies of investment trusts differ and so to does the associated risk.

Before making any investment decision, consult a good financial advisor !