Your guide to the fundamentals of investing Your money. Our expertise. This guide is for information purposes only. It should not be seen as advice. Investments in the stock market may fall as well as rise, and it is not an appropriate place for short term investments. You may get back less than you paid in. All investment carries risk and it is important you fully understand these risks and are willing to accept them.
Reaching your investment goals We understand that deciding on the best way to reach your investment goals can be difficult. Saving might not be enough, but investing can seem daunting. That s why we ve created this guide to take you through the basics of investing, demystify the jargon that surrounds it, and to help you find a suitable way to reach your investment goals. Contents Things to consider before investing 3 Working out if investing is right for you 4 The difference between saving and investing 6 Choosing the right kind of investment 7 How do I invest? 8 What can I invest in? 8 Risk & Return 9 Diversifying your assets 9 Why invest with? 10 How to contact 11 Glossary 12 2
Things to consider before investing When you invest, you introduce risk to your money; this means its value may fall as well as rise over time. It s important that you are able to leave your investments to ride out these short-term falls, so that it is able to recover and has the potential to grow over the long term. Do you have some rainy day savings? We advise you to have at least three months worth of outgoings in cash that you can instantly access. Have you paid off any existing debts? Before you choose to invest, check that any existing debt you may have, such as credit cards or overdrafts, wouldn t be better repaid or reduced first. Do you have adequate insurance protection? No one really knows what s ahead, so it s a good idea to ensure your insurance protection needs have been met. A good example of this would be life cover so you know that you and your family are protected. 3
Working out if investing is right for you Before you make any decisions, it s important to understand if investing is the right thing for you and your money. To help you decide, we recommend writing down what you would like to achieve by investing (to save for a deposit on a house, for example) and also how much risk you are prepared to take. Here we have listed a number of questions to ask yourself, which may help you make the right investment decision. If you choose to invest with we will also take you through our online Attitude to Investing questionnaire. 1) What are your goals? 2) Over what timeframe do you want to invest? What do you want to achieve with your money/what are your investment goals (e.g. house deposit, children s education)? Once you ve worked out your goals, you need to decide for how long you can invest your money. Do you need quick and easy access to your money or have a goal that you want to reach in under three years? If the answer is yes, you might be better keeping your money as cash in a bank or building society account. That way you will not risk any capital losses that could affect your short-term goals. Are you looking to simply grow the value of your money over time? [ ] Yes [ ] No Or is there a set amount that you want your money to grow by, and if so how much? If the answer is no, and your investment goal allows you to leave your money for three years or longer without touching it, then investing may be suitable for you. Having a long-term timeframe in mind is important when investing, as it gives your investment time to grow, and recover from any short-term losses. Typically, the longer your time horizon, the more risk you can afford to take. For the highest risk investment strategy we offer at Click & Invest, we recommend a minimum time horizon of seven years. 4
3) How much risk are you willing to take? Investing carries a certain amount of risk. As investments typically fluctuate in value over time, it is important to understand that the value of your investments can go down as well as up, and that you may not get back as much as you originally invested. That s why it s really important to understand your own attitude to risk, what level of risk you are comfortable taking, and how much money you could afford to lose without it having a financial impact on your lifestyle. How do you feel about putting your money at risk? How would you feel if some or all of it was lost, even over a short period of time? I m happy to take (tick your preferred option): Low risk This is considered a safer investment option, as the chances of losing the money you have invested will reduce. However, less risk could mean your return is lower than that of a medium or higher risk investment. Examples of low risk investments: Cash, Bond or Fixed Interest Medium risk There is a greater chance that you could lose some of the money you have invested, but also an improved chance that you may increase the value of your investment over time. Examples of medium risk investments: Blue-chip equities, Property High risk 4) How much do you want to invest? How much can you realistically afford to invest? It is important not to overstretch yourself, and you should always have at least three months worth of outgoings kept separately. As investing is a medium to long-term strategy, it is best if you can avoid making cash withdrawals, to ensure that your investments perform as well as they can over time. If you did lose money, how easy would it be for you to accommodate those losses? For example, would it affect your family or lifestyle? There is a greater chance that you could lose a significant amount of money, or even all of the money you ve invested. However, there is also the potential to increase the value of your investment further over time. Examples of high risk investments: Emerging markets, Smaller company equity funds 5
The difference between saving and investing It s important to remember that saving and investing are not the same thing. Knowing the difference and when it s right to use each or both of them can help you achieve your goals. Saving Saving means putting money away in a safe place like a high street bank or building society. The usual aim is to use the money to save for something in the short term, such as a summer holiday, or for a rainy day. Saving is considered very low risk it offers the chance to earn interest on your savings, albeit not always with a very high rate. Saving is often used for shorter-term financial goals. This is because saving for the longer term could mean the interest rate you receive may not be in line with inflation, which actually means your money could be worth less. Over the last few years, interest rates have remained very low and as a result more people are looking at investing as an alternative home for their money. Investing Investing means putting money into investments such as shares or bonds with the aim that its value will grow over time and you may make more money as a result. Investing carries a greater level of risk than saving, as there s no guarantee that you will get back the money you originally invested. However, the greater risk also provides the opportunity for higher return, if what you invest in performs well. Investing is recommended for medium to longer-term financial goals if you do invest, you should be prepared to keep your money invested for three years or more. 6
Choosing the right kind of investment If you decide to invest your money, you will usually have the choice of either a growth or income investment. Understanding the difference between growth and income is important as they will be directly linked to your investment goals, and what you would like your investments to deliver. Both carry a certain level of risk, but deliver a different kind of return. Income investment Investing for income means investing in assets that can provide you with monetary payments such as dividends or interest. These investments are less likely to grow over time but can be useful if you require an income. Growth investment Investing for growth involves investing in assets that focus on growing your money and will not normally offer you a monetary payment. If you choose to invest with, we only offer a growth investment strategy, which means any income made will be reinvested. Our specialist Investment and in-house Research Teams select the investments which they believe have the growth potential to meet your investment goals. If you believe an income investment is right for you, we recommend you speak to a Financial Adviser. 7
How do I invest? There are several ways you can invest. Below we have listed three options. Direct Investment Directly investing in the stock market is where you select and manage your own investments via an online platform or over the phone with a stockbroker. With this approach you are creating your own investment portfolio, and will not receive advice. The approach is suitable for experienced investors with strong knowledge of financial markets. IFA & Wealth Managers Investing with an IFA (Independent Financial Adviser) or Wealth Manager will mean you have a detailed conversation about your financial circumstances and will be recommended suitable financial products and investments. This approach takes a holistic view of your circumstances, and is suitable for those with little financial knowledge who require advice on how much to invest and how it should be invested. Typically, Wealth Managers are only available to those with larger sums of money to invest. Investing with an online investment service such as means you will receive advice about a specific investment objective, as opposed to an assessment of your overall financial situation. This is classified by the FCA as simplified advice, as we do not offer any advice on your existing financial products. may be suitable for investors who know how much they want to invest, but would prefer to have an Investment Manager to make the investment decisions on their behalf. What can I invest in? There are five common types of investments known as asset classes which you can invest in. These asset classes are often the same for all investment companies, and are: Cash The savings you put in a bank or building society account. Fixed Interest These are often bonds. This is when you loan your money to a company or government, who will pay out a fixed rate of interest over a given time period, at the end of which they will also pay back the loan. These can be incorporated within a fund. Equities These are the stocks and shares of a company. When you invest in equities you will be buying a stake in a company. Property Land or buildings whether commercial or residential. These can be incorporated within a fund. Alternative Investments These are the investments that sit outside the traditional asset classes and include precious metals or hedge funds. 8
Risk & Return Unlike savings that you would keep in a bank or building society account, investing in the stock market involves a higher amount of risk. The value of your investment may go down as well as up over time, therefore it is important to make sure you re comfortable that you might not get all the money back that you originally invested. In specific reference to the stock market, you may see this risk described in terms of high or low volatility. If the value of an investment moves up and down rapidly over a short period of time, it is commonly described as highly volatile, whereas the value of an investment that moves up and down more slowly over a longer amount of time, is described as having low volatility. The graph below shows how a typical investment can fluctuate over time. Investment B (a high risk portfolio) is said to be more volatile than Investment A (a low risk portfolio). Diversifying your assets Your portfolio will contain a blend of different investments across a range of asset classes. Each asset class (such as stocks, bonds, cash or property) has a different level of risk. Combining these assets in different proportions allows you to reduce the risk of just holding one type of asset. This is known as diversification. Holding a broader spread of asset classes helps reduce the overall risk of your portfolio, as more of your portfolio will be invested in low risk assets such as cash and bonds. Higher risk portfolios will typically hold a greater exposure to equities. Your asset allocation is therefore based on your individual risk level, which we determine from the information you provide in our risk questionnaire. Within each asset class we will further reduce risk by diversifying across countries, sectors and companies. VALUE TIME Low risk portfolio High risk portfolio For illustrative purposes only 9
Why invest with? is an online investment service for individuals with 10,000 or more to invest. Your investment portfolio is created and actively managed for you based on your attitude to risk and your investment goals. Our experienced Investment Managers will take care of the hard work and make investment decisions on your behalf. Your investments actively managed by experts Our specialist Investment Team will continuously manage your investment portfolio for you. They take responsibility for making changes to your investments, to help you achieve your investment goals. Their decisions are based on their experienced assessment of market conditions, and supported by the analysis of our in-house Research Team. 180 years of investment experience is part of Investec Wealth & Investment, who have over 180 years of experience managing clients investments. We re also part of the Investec Group, who currently look after over 154 billion* for clients worldwide. So you can feel confident knowing your money is in expert hands. *Funds under management as at 30 September 2017 Intelligent advice that s specific to you The advice we offer is always specific to you, your attitude to risk and your investment goals. We understand that your situation could change, so you can update your investment goals at any time. This allows our Investment Managers to continuously assess which investments are right for you. We don t just track the market At, we won t only buy investments that simply track the market. Instead, our experienced Investment Managers, along with the support of our in-house Research Team, will actively aim to beat it. We will select investments that we believe are right for you and your investment goals. Transparent fees At, we believe in being totally transparent with our clients, and our fees are no exception. Fees are an important consideration in determining the long-term performance of your investment portfolio. That is why we keep our management fee as simple and low as possible. 24/7 Access You can stay up to date with the performance of your investments whenever and wherever you like. Simply log in to your account online or via the Investec App 365 days a year. Or if you prefer you can call our dedicated support team with any account questions you may have. 10
How to contact If you are interested in, visit clickandinvest.com/fundamentals. Alternatively, please call our dedicated support team who will be happy to answer any questions you have about setting up your account. Our team are available 24 hours a day, 365 days a year. Or, if you d prefer, you can speak to us on Facebook or Twitter. Call us 0808 164 1234 or +44 203 866 1234 Email us Follow us hello@clickandinvest.com @InvestecClick Investec Investec Investec Investec Limited is an Appointed Representative of Investec Wealth & Investment Limited which is authorised and regulated by the Financial Conduct Authority. Investec Wealth & Investment Limited is entered on the FCA register under reference 124537. Investec Click & Invest Limited is registered in England, Company Number 03700427. Registered address 2 Gresham Street, London, EC2V 7QP. CLI008_V2.04/18 11
Glossary Alternative Investments An investment in any asset class other than stocks, bonds, cash or property. Typical alternative assets include hedge funds, commodities such as precious metals or oil and gas, and collectables such as art, wine, antiques or stamps. Asset Class A category of assets, such as stocks, bonds, cash or property. Blue-chip Equities A blue-chip equity is the stock of a large, well-established and financially stable company that has operated for many years. Bond or Fixed Interest Investments A bond is when an investor lends money to a government or company in exchange for regular interest payments, as well as future repayment of the original amount lent. Capital Gains Tax A type of tax applied on capital gains. Capital Gains are the profits that an investor receives when they sell an asset for a price that is higher than the original purchase price. Diversification Diversification is a risk management technique which means the portfolio is made up of a mix of different types of investments. Dividends A dividend is a payment made by a company to its shareholders. The level of dividend payments is determined by both the company s earnings and its management strategy. Emerging Markets An emerging market is a country whose economy is progressing towards becoming more advanced, usually by means of rapid growth and industrialisation. Fund A fund is a pooled investment vehicle which brings together money from multiple investors. A fund manager will then invest in various asset types, such as equities, bonds and a variety of other securities, depending on the objective of the fund. Hedge Fund A hedge fund is a type of alternative investment, which is different from a traditional buy and hold investment fund. It can use more complicated investment strategies such as shorting, derivative trading and leveraging. Typically, the underlying high risk assets are partially offset, or hedged, against each other, with the overall aim of generating positive returns in both rising and falling markets. Holistic Reviewing all financial circumstances or needs of an individual and not just one part. Income Money received on a regular basis from investments. Individual Savings Accounts (ISAs) These are tax-efficient savings or investments that allow you to save and invest a limited amount each year. There are two kinds of ISA: stocks and shares ISAs and cash ISAs. All income you earn and capital gains you make on funds and cash held within an ISA are tax-free. The tax advantages of ISAs may change in the future and also depend on your individual circumstances. Inflation Inflation is the rate at which the general level of prices for goods and services is rising. Interest The charge you pay to borrow money, typically expressed as a percentage of the amount borrowed. A saver or lender receives interest from the person or institution they have lent their money to. Investment Portfolio An investment portfolio is a combination of different investments mixed and matched for the purpose of achieving your financial goals. Property An investment in Real Estate, i.e. land and buildings. A typical property investment will be via a fund, investing in commercial real estate such as office and retail space. Shares Shares represent a share of ownership in a company and these shares are listed on the stock exchange. If you buy a share in a company, the company can use your money for its own purposes (for example, to expand its business) and in return you own a proportion of that company. The aim is for the company you invest in to grow in value, making your shares increase in value too, or to receive a share of the company s profits in the form of dividends. Stocks When you own more than one share in a company or several companies, these are called stocks, because stock generally refers to a portfolio of shares. Volatility The extent to which asset prices or interest rates fluctuate over time. Volatility is often used to assess the potential risk associated with an investment. 12