Financial Investments

Doherty Lantin Jordanstown

We will offer to do a full fact find to ascertain your needs and objectives.

This will include a "Risk" assessment. When completed we will make a recommendation which is personal to your circumstances in terms of tax efficiency, age and family situation. In general terms people either invest for growth or for to get an income.

The value of the investment can go down as well as up and you may not get back as much as you put in.

Risk & Rewards

It is important when investing that you understand the risk factors and that you only invest in areas that are consistent with your attitude to risk.

The following needs to be taken into consideration:

  • Risk categories is not an exact science.
  • There is a balance between risk and potential return - generally the higher the risk the greater potential return. But also the greater risk of losing more.
  • Risk is related to how long you are choosing to invest. If you are investing in the Stock market it should be for the medium to long term. i.e. 5 years or more.
  • It is good practice to diversify your Investment across the main asset classes of Cash, Fixed Interest, Property and Equities (Shares).
  • Past performance is not a guide to future returns. The value of Investment can go up or can come down.

Pound cost averaging

Pound Cost Averaging is the term used to explain the technique of buying a fixed amount of an investment through regular savings. An Investor who puts money into an investment on a regular basis, may benefit from the smoothing out effects of short term fluctuations in the share price that can be normally experienced.

The table below illustrates how pound cost averaging works using an example of a regular investment of £100 per month:

Month Amount Invested (£) Share Price (p) Number of units purchased
January 100 30 333.33
February 100 50 200.00
March 100 55 181.82
April 100 60 166.67
May 100 65 153.82
June 100 60 166.67
July 100 50 200.00
August 100 60 166.67
September 100 65 153.85
October 100 65 153.85
November 100 70 142.86
December 100 80 125.00
Total 1200 710 2144.55

We can see that the share price can go up and down from month to month. This will affect the number of shares purchased. When the share price is high, the number of shares purchased will be fewer. However when the share price falls, the number of shares purchased will increase.

In the example the average share price is 59.16p over the 12 months, but the average cost per share is 55.95p. So the amount paid per unit is 3.21p less than the average price over the same period which has resulted in the investor paying less per share by investing regularly.

This "drip" feeding into the market can therefore be beneficial and over the longer period it smooths out the short term fluctuations.

These investments have been in existence since 1999, being the successors of PEPs and Tessa's. They are available to all UK residents over the age of 18. (Over 16's can take out a Cash ISA).

The benefits are that the Investment is largely free of Income and Capital Gains Tax and for this reason they are generally the first recommendation from the Financial Industry. There are two types of ISA - Cash and Stocks and Shares. The legislation concerning these investments change from time to time.

The maximum investment permitted for the current tax year is £15,240 in an ISA. You can choose to invest the total amount of up to £15,240 in a Stocks and Shares ISA. On the 1st July 2014 the ISA became a NISA and the following rules apply.

  • The maximum will be £15,240.
  • This can be invested in either Stocks and shares or in Cash ISA.

You could use the Pound Cost Averaging technique to Invest over the year and benefit from the smoothing out of short term fluctuations.

OEICS - Open Ended Investment Companies

These are flexible equivalents of Investing in Unit Trusts. The general idea is that you invest in the Stock Market and pool your investment with many other investors. This gives more people access to the Market and it spreads the risk.

  • OEICs are regulated by the FCAM.
  • They have single price and charges are shown separately.
  • Unlike the ISA they are subject to Capital Gains Tax although you can use your annual Capital Gains allowance to offset the gain.


Investment Bonds are unit-linked, life insurance-based investments. They are suitable for those who want to invest a lump sum of over £5,000 for the medium to long term. They can be used to increase the value of your money or to provide a regular income of up to 5% per year. This income is regarded as a return of your capital rather than investment gain and has no tax liability. Investment Bonds are particularly useful in 3 situations:

  • They are particularly attractive from a tax point of view for people who are presently higher rate tax payers, but are likely to be basic rate taxpayers when the Bond is cashed in.
  • The 5% withdrawal can be especially useful for retired people as it has no impact on any means-tested benefits. This tax allowance for 2016/17 is £11,000. However this allowance decreases by one pound for every two pounds of income that exceeds £27,700 in the 2016/17 tax year. As the 5% does not count as income, it has no impact on personal tax allowances.
  • Because of its status as a life assurance policy, you can place an Investment Bond under a trust. This means you can give it away, lend it or assign it without creating a tax liability. As inheritance tax planning is all about transferring money from one person to another, the investment bond has a big part to play.

So in summary

  • Anyone over 18 can invest in a Bond.
  • Bonds invest across the asset classes of Cash, Fixed Interest, Property and Equities.
  • You can select a Bond with a category of risk that reflects your attitude to risk.
  • Income tax is paid within the Bond, but it has benefits for higher rate tax payers.
  • You can take an annual or monthly income from the Bond.
  • For each of the above investments there are complexities. So contact us for advice so that you can be guided to make the right choice with your investment.