Investments
Unit Trusts and OEICs
Most people understand the benefits of collective investment: the fact
that investment risk is spread over a range or "basket" of
investments, that a professional manager is used to make investment decisions on
your behalf (except for tracker funds), and that there are economies of scale
and increased liquidity to be had for investors.
Unit Trusts and OEICs are collective investments,
which are "open-ended" (OEIC stands for
"Open-ended Investment Company"), that is to say as more money is
invested in the fund, more units are added.
Investment may be made by regular monthly direct debit, or
lump sum.
Taxation: Growth of the fund value is subject
to capital gains tax when the investment is sold, and income from dividends and
interest is subject to income tax. Remember you have a Capital Gains Tax
annual allowance - only gains over this sum attract CGT in a tax year. The
current allowance is £9,600 (2008/9).
What you will get back depends on how your investment grows. The value of
the investment is determined by the value of the units, the price of which can fall as well as rise.
You should remember that past performance is not necessarily a guide to future returns.
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