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One of the best ways of investing your savings is to put a certain amount into an ISA. There are lots of different types of ISA available, so look around for the best deal. At present, Legal & General offer a Corporate Bond ISA, which is classed as a type of
Stocks and Shares - ISA
, which paid out 6.1% interest over the 2008-2009 tax year. However, ISAs have fixed investment limits, and you have to be a tax-paying UK resident to have one, so if you have funds that you want to invest that can’t be put into ISAs, there are a number of other options available.
The next best thing to an ISA is government or corporate bonds. By far the least risky of these is government bonds, also known as gilts. While these are a safe investment, with an average yield of just 3.1% per annum, you might be tempted to look elsewhere for a bigger, albeit riskier, profit.
Tracker funds offer returns that are roughly in line with the movements of a major share index such as the FTSE 100 or the FT All Share. These are fairly cheap, simple, and easy to follow, and many people see them as being less of a risk. However, they have the distinct disadvantage of giving small returns in bad years while never outperforming the market in good ones.
Income funds are managed in order to produce an income from shares which pay high dividends, bonds, or a mixture of the two. Because a company has to be fairly mature in order to give out dividends on a regular basis, these are less risky than some other types of fund, although with an average yield of around 4.2%, they still fall some way short of the best ISAs.
If you want high yields, and you’re prepared to take a bit more of a risk, a capital growth fund can be the way to go. These funds are invested in companies which are rapidly expanding, and can sometimes offer outstanding returns, although you have to be prepared to take the losses on the chin if it goes the other way.
If you want something that falls between the safety first approach of an income fund and the high-risk nature of a capital growth fund, you could go for something called a balanced fund. These essentially invest some of your funds in income funds and some in capital growth. These don’t tend to perform quite as well as capital growth funds, but they are a little more reliable.
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