Risk of pain can mean greater gain growth
Clifford German looks at the ups and downs of capital growth and investment income want it kept simple please
Wednesday 20 March 1996
Our chart shows that the majority of assets producing growth involve some risk of loss as well as gain. In fact the only assets offering risk- free gains are National Savings certificates and Guaranteed Growth Bonds which actually offer accumulated income, or Guaranteed Equity Bonds from providers such as TSB which through clever use of dealing in share "futures" behind the scenes can guarantee investors against losses, and lock in gains if the stock market rises. The downside of course is that there are no dividends along the way.
Some capital gains are automatically tax-free, like increases in the value of the home you live in, although these will be at best a distant memory to most people. The Treasury has also decreed that capital gains on Personal Equity Plans and special tax shelters like Venture Capital Trusts and Enterprise Investment Schemes will be tax-exempt.
But for most investors the fact is we can make gains without having to take them and even realised gains of less than pounds 6,000 in this tax year, and pounds 6,300 in 1996-97, are tax-free. All long-term gains made before 1982 are now tax-free and taxable gains made since 1982 can be scaled down to allow for inflation.
The biggest choice awaits investors who are willing to accept a genuine risk that their investments may go down in value as well as up. The opportunities available include With-Profits Bonds and Managed Bonds, which are long- term investments bought with a lump sum from insurance companies, and With-profits policies and Endowment policies which are mainly bought through regular savings plans. They are not very flexible however and the progress of the investments is not easy to monitor.
Investment trusts and unit trusts are easier to track and to resell. A wide choice of trusts that specialise in capital growth is available both for lump sum investors and regular monthly savers. Investors with a few hundred pounds to spend can contemplate investing directly in company shares, using low-cost brokers such as Sharelink to keep down commission charges, or "stagging" privatisation issues. Guaranteed capital gains are on offer through buying special low-coupon government stocks, like Funding 3.5 per cent 1999-2004, which offers modest income but at today's price provides a guaranteed 25 per cent capital gain if held until it is redeemed.
Last but not least they can investigate the charms of buying "second- hand" or traded endowment policies, the unwanted policies which are otherwise surrendered by the hundred thousand every year when they could be sold, or bought at auction, by investors who buy the policy and take over responsibility for paying the remaining premiums in return for the full value of the policy including the valuable terminal bonuses when they mature.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Liam Neeson's Downton dreams
- 1 Mario Balotelli: Staff at arson-hit Manchester Dogs' Home convinced Liverpool striker is behind five-figure donation
- 2 Scottish independence live: Scotland gives a clear 'No' in historic referendum - as it happened
- 3 iOS 8 is full of shiny new features - but it's terrible news for app developers
- 4 Friends 20th anniversary: Six things we wouldn't have without influential comedy series
- 5 Scottish independence: Tory revolt against 'devo max' grows as Rail Minister Claire Perry joins
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: The Queen breaks silence on referendum debate – as think tank warns of £14bn black hole if Scotland votes Yes
Portuguese academic says British are 'filthy, violent and drunk'
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...
Day In a Page
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize