Investment Opportunities for Cautious People
Sources of Protected Capital Investments and Savings
Jan 6, 2009
Falling interest rates have seen many retired people and those living overseas on fixed incomes suffer a large drop in income. Retired savers are getting only a third of the income they were 3 months ago. Identifying better investment opportunities has never been more essential.
Individual Savings Accounts
An Individual Savings Account allows someone to invest up to £7,200 in a stocks and shares ISA or £3,600 in a stocks and shares ISA and £3,600 in a cash ISA. Those in a relationship have further investment opportunities as both partners can invest up to their full allowance.
An Individual Savings Account is of particular benefit to a higher-rate tax payer as it prevents the loss of 40% of any income. It is well worth considering using an ISA allowance with stock market investments and savings so the maximum benefit is achieved from the higher investment potential.
High-Yield Stock Market Investments
Few people associate safe investments with the stock market, but this belief may be incorrect. The FTSE 100 index is currently sitting at about the 4500 mark, down from highs of 6600. Why do some investors only want to invest in the stock market after everyone else has made money?
Darius McDermott, managing director of Chelsea Financial Services believes investors should consider higher-yielding assets like bonds and equities. “I’ve never seen yields on equities like it: M&S is providing a dividend of 8.8%, BP 5.7%, HSBC 8.1% and Vodafone 6.9%. Even if returns remain level you would be receiving up to three times more than cash deposits.”
Whilst nobody should put all their eggs in one basket, an investor may wish to put money into a diverse share portfolio and spread the risk. The yields will provide a better source of income for the retired than any savings accounts at the current Bank of England base rate.
Capital-Protected Stock Market Investments
Those seeking safe investments and savings opportunities could take a 5 year view and invest in a protected-capital FTSE tracker fund. This investment doesn't risk any capital, but instead offers investors the chance to benefit from growth in the FTSE 100 index.
Fixed Term Bonds
All fixed-term bonds offer capital protection whilst providing a fixed rate of interest throughout the term of the agreement. Using an online checker allows an investor to identify fixed-term bonds that offer the most favourable returns. Unless a non tax payer, pay attention to the net rate of interest only.
National Savings Premium Bonds
It is possible to invest between £100 and £30,000 in premium bonds. Investors don't receive interest but they do get to take place in a prize draw each month. Tax-free prizes range from £50 to a million pound jackpot. The investment is capital-protected and it is usually possible to withdraw money within about 10 days.
There are a number of varieties of investments and savings available, but few have the current potential of stock market investments. It is well worth investing in a 5 year capital-protected FTSE 100 tracker. Don't simply invest in stocks and shares when they have already risen as the opportunity may have already gone.
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