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www.InvestmentGuide.co.uk How Best to Invest in Stocks and
Shares
Investment trusts
Unit trusts
Offshore funds
SHARES
(Also known as OEIC, pronounced oik)
You invest in shares which closely reflect the value of the shares or other assets held within the fund. Open ended investment funds are managed by professionals. You are buying shares in a company, but they otherwise work in a similar way to unit trusts. They differ from Investment Trust Shares in that the number of shares in issue are increased or decreased at will by the managers, in response to demand, as they are with a Unit Trust. This is a new type of investment which is taking time to catch on. Many unit trusts are now converting into this type of investment and most of the rest are likely to follow.
Who can invest Anyone.
How worthwhile Potentially good value as a long-term investment for taxpayers if you buy and sell at the right time; poor value if you don't. High charges may make them unattractive. Consider instead Investment Trust Shares, Unit Trust or OEIC Index Tracker.
Minimum £500, £1,000 or £5,000.
Maximum None.
Suitable Lump sums.
Money back Usually up to 5 working days after you sell at the market price.
Interest Variable. Called dividend or distribution. Some funds don't pay interest. You hope to make a capital gain by selling for more than you buy; you may lose money.
Interest paid Often half-yearly by cheque to you or direct to a bank account or accumulated.
Tax 20% tax is deducted from the distribution (called a tax credit) whether or not you accumulate it. Non-taxpayers can reclaim the tax from the Inland Revenue Higher rate taxpayers have to pay extra; basic and 20% taxpayers don't. You can avoid this tax for a limited period by investing through a Maxi ISA. Gains on shares are liable to capital gains tax, see Capital Gains Tax, although the managers pay no capital gains tax if they make gains on shares held by the fund.
Fees to pay Initial charge: up to 6%. Yearly charge likely to be around 1½% deducted from your income.
Passbook None. Certificate issued.
Children Under 18 shares should be held in an adult's name and can be designated with the child's name or initials.
Risk High but not as risky as buying individual shares. The value of shares goes down as well as up.
How to invest There are likely to be lots of new offers advertised. Read press comment on them.
Where from See press advertisements. They will be marketed by existing unit trust and investment trust groups.
Other types of direct investment
in shares
Shares - A Beginners Guide to Making
Money
How Best to Invest in Stocks and
Shares
Investment trusts
Unit trusts
Offshore funds
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Last updated 20 June 2003