Basic Investment Guide

Traditionally, investment has been seen as something done only by the very rich while the rest of us make do with simple savings accounts with our existing bank. However, times have moved on, and we can "play the market" these days.

There are plenty of web sites, for example, that allow you to deal in shares with just a basic understanding of the market.

That's not to say there is no risk involved, so you should never anything more than you have to spare.

Investment Trusts

Investment trusts are companies that invest in other companies through purchasing of shares. An investment trust is created by making a share issue, just as with any other company. The finances raised by this are then invested in a portfolio of shares.

Basically, you own a percentage of the fund, in proportion to the number of shares you have, and these shares can be bought and sold just like any others.

OEICS & Unit Trusts

Unit trusts are pooled investments that are managed by a professional. Almost all unit trusts use the money from investors to invest in a wide ranging portfolio of different company shares.

An open-ended investment company (OEIC) allows private investors to invest across different shares, but instead of buying units in a trust, you buy shares in an OEIC. An OEIC shares trade at one price, rather than different prices for buying and selling, in the same way as you do with a unit trust.

Derivatives

Derivatives are starting to appear on the retail market, but can be complicated, so you should understand what you are doing. Basically, you are betting on numerical outcomes. Great care should be taken with derivatives because they are not for beginners.

For more information about deriviatives, visit Derivatives US.