Securinvest Financial Planners

• Cash
• Fixed Interest
• Shares
• Property

You have the advantage, when mapping out your investment journey, of being able to spread your funds across several classes of business to take advantage of capital growth, liquidity and fluctuating markets. This gives you a brief rundown of the four major classes of assets - cash, fixed interest, shares and property - each of which has a different risk profile.

Cash
This covers on-call deposits with banks, building societies and credit unions; or overnight money market investments. These are usually described as liquid assets, meaning that they can be converted to actual cash very quickly.

Features:
The capital is safe relative to other asset classes. You have immediate access to your funds.

What do I need to know?
There is no protection from tax or inflation. The returns are highly variable. Low returns are expected in the long term. Returns are fully taxable.

Fixed Interest
Basically you lend your money for a fixed term and in return you receive regular interest payments, which are usually fixed until they mature. There are generally three types- government bonds, private company debentures and fixed term mortgages.

Features:
Generally secure. Income is known. You know exactly how much you will be getting and when.

What do I need to know?
Interest rates can vary and may not keep pace with inflation. Access is limited in an emergency.

Shares
These are stocks or a part ownership (your share) in a business, which can be traded on the public Stock Exchange. In effect, you buy into a company's earning power. Historically, investors have benefited more from shares than from any other form of investment.

Features:
Growth above inflation in the long term. Growing income. Potential for tax benefits. Easily cashed in. Easy to divide up the assets. Can diversify internationally. Can reinvest via dividend plans.

What do I need to know?
Stock market volatility could lead to losses if forced to sell. Market slumps can be prolonged. Companies can underperform or go out of business. Difficult for the direct investor to get sufficient diversification.

Property
This means real estate, usually residential, commercial, retail, industrial and rural. One of the major risks with investing directly in property is that it cannot be easily converted to cash; in other words, it is not a liquid asset. However, if you choose to invest in listed property securities, which do not require so much capital outlay, your investment is more liquid.

Features:
Capital value and income should rise with inflation. Potential for tax benefits. Rent is a stable form of income. Emotional security of "bricks and mortar".

What do I need to know?
You can't cash it in easily in an emergency. Can't divide up the asset very easily. Can be easily destroyed (eg through fire). Possible problems with tenants. High personal management input. Capital concentrated in one single asset.