It outperform most other asset classes. 2. Bonds/Gilts –

It is very important to look at the asset
classes which you have exposure to, as this will affect the risk which you face
as well as the return which you are likely to achieve. What we want to do in this Document is show you
how to diversify assets provide a healthy income as and when you want/need to
access your assets.


key with any investment is that you must diversify the assets which you hold.
When I say assets there are really 5 different areas which you can invest in
within most regular savings products:

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– investments into companies from across the world. These will carry risk and
the values will change on a daily basis but over the long term they tend to
outperform most other asset classes. 

Bonds/Gilts –
These are essentially a loan to a company for which you receive a return, they
are generally lower risk than shares.

Commodities –
Refers to raw materials such as gold, copper, coffee etc. They can all go down
in value.

Property –
Commercial property such as an office building. The growth comes from the
increase in the value of the building and the rent which the tenants pay.
Property can go down in value.

Cash – No risk
to the value of the investment however your money may be eroded by inflation
(the rate at which goods increase in price). For example interest rates are
currently at 0.25% and according to BBC “inflation is at 2.3%”( The BBC
website) so keeping cash will mean that the purchasing power of your money is


Asset classes 1 to 4 all
carry risk to the value of your initial investment and you may get back less
than you invested. However, they are the only way which you will be able to
beat inflation and ensure that you make a meaningful return. It is very
important that any investment you make is diversified across all of these asset
classes as this reduces the risk you face. We will touch on this in more detail
in a later section. 


Different types of products: including Summary, Risk, Taxation and


1.    Deposit based- Bank Accounts According to Wikipedia “A
deposit account is a savings account, current account or any other type of bank
account that allows money to be deposited and withdrawn by the account
holder.”(Wikipedia2018) as mentioned above although cash has little or no risk
your cash savings may be eroded by inflation. However it is a good place to
keep an emergency fund ( easily accessible cash incase of an emergency)

Pension Schemes – according to the pensions
Advisory service “a pension scheme is just a type of
savings plan to help you save money for later life. It also has favorable tax
treatment compared to other forms of savings” (the pensions advisory service
2018) while a pension scheme is a long-term regular savings plan I’m just going
to give you a brief overview or we would be in this training session all day.

Individual savings accounts (Isa’s) according to GOV.UK “there are 4 types
of ISA’s”

Cash Isa

Stocks & Shares Isa

innovative finance ISAs ( mix between cash and Stocks & Shares )

Lifetime Isa

Isa are really the first starting point from
a Long term savings standpoint as they allow you to invest with the possibility
of tax free growth( Maximum you can invest is £20,000 per year). They come in
two forms; cash and stocks & shares. The great thing about an ISA is that
is grows tax free so it makes sense to put something in there that will have an
opportunity for growth. By doing this you will be exposing yourself to assets
which do carry risk (if investing in stocks and shares) but will undoubtedly
outperform cash in the long run. overtime equities will outperform cash – the
key is to hold the investment for a minimum of 5 years.

After pensions, ISAs are a brilliant way to be tax efficient and as described
above this can be a really efficient use of savings income and it can provide
you with flexibility to access the capital should you ever need it. Income from
pensions is liable to tax however income from an ISA is completely tax free.
Therefore this is a great way for you to top up retirement income without every
paying higher rates of income tax. With regular contributions you can actually
benefit from volatility as it means that you are picking up units in investment
funds at a lower price. (as mentioned above pound cost average)


4.       Unit Trusts After ISA’s and Pensions the next
place to be investing is into a Unit Trust. When making an investment you
usually make your return in two ways:

Growth in the value of the share price/asset price

Dividends or Income which is paid out to investors

Each return is taxed in a different way and
our objective is to help you shelter both the ‘Growth’ and ‘Dividends’. A Unit
Trust is another way in which we can shelter the majority of returns from tax.

After an ISA allowance you should look at
using your Capital Gains Tax (CGT) allowance. Everyone in the UK has a CGT
allowance of £11,300 a year which means you can make gains from investments up
to £11,300 and pay no tax on this growth. CGT allowances are like ISA allowances
in the fact that you lose them each year, therefore some assets are only
measured against your CGT allowance when you come to disposing of the asset,
for example property. However by investing into more liquid assets, such as
unit trust funds, you can get into the habit where you are using this allowance
every year. The way in which this works is as follows:

You hold a unit trust fund and at the end
of the tax year we calculate the gain over that year

We then instruct you to make a fund switch
to ‘crystallise’ the gain

We then file this on your tax return and as
long as the gain is under £11,300 it is all tax free

If you make a loss in a year we can
crystallise this and you can offset this loss against future gains

After 30 days you can rebuy your original
funds and the gain is washed away


We help clients to do this every year and
essentially they are washing away their gains each year so they never have a
large taxable gain as you would with a buy to let. This means that a £100,000
gain over 10 years could pretty much be completely tax free whereas with other
assets this could be as much as losing £17,780 (20% rate) or £25,000 (28% rate)
to tax.

In addition, new rule changes mean that the
first £5,000 of dividends earnt each year will be free of any tax. This
therefore means that we can set up a Unit Trust investment which, if managed
correctly, will grow tax free up to £16,300 per annum. Assuming a growth rate
of 5% pa, the diagram overleaf shows how an investment of £200,000 could grow
free of any tax if managed efficiently.