Get your cash to go the distance

Investing for growth: here and on page 8 we show how to enhance the value of your savings as you plan for future commitments

Everybody has their own reason for investing for capital growth. You might be saving for early retirement, to put a child through school, for a wedding, car or simply a rainy day.

Whatever the motivation, we should all have the same underlying goal: to beat inflation and maintain the purchasing power of our money. Anything above that is a bonus.

There are a number of questions you should ask before choosing a growth investment vehicle, says Philippa Gee, an independent financial adviser (IFA): "How long do you want to leave the money? How much access do you want to that money? Are you prepared to take a risk? What is the most tax-efficient way of investing?"

Your answers will largely determine the type of investment you choose. For example, the longer you can leave the money, the more scope you have to invest in stocks and shares.

Unit trusts are probably the most popular way for individual investors to enter the stock market. They pool money from thousands of different investors and put it into a wide range of companies. Most PEPs and individual savings accounts (ISAs) are unit trusts, offered by well-known names such as Fidelity, Jupiter and Perpetual. Alternatively you could try investment trusts, which are companies that invest in other companies.

If you are averse to risking your money, you might look at safer investments such as guaranteed equities, which protect your initial capital, or corporate bond funds, which are IOUs issued by companies to fund their expansion. Figures from the Association of Unit Trusts and Investment Funds show that pounds 1,000 invested in the average corporate bond fund 10 years ago would now have risen to pounds 2,211, far better than a building society and only a little more risky.

"You could also consider with-profits bonds, which smooth out your investment returns because annual gains are locked in," says Ms Gee. "National Savings five-year fixed-interest certificates should give you steady growth." The NS five-year certificate currently pays 4.3 per cent gross on investments between pounds 100 and pounds 10,000. This may not sound much but it is tax free and, because it is backed by the Government, very low risk.

So who should be investing for growth? "Younger people and the pre-retired typically have the greatest amounts to invest for capital growth," says Mark Dampier, head of research at IFAs Hargreaves Lansdown. "They already have income and don't need any more so are saving for their future."

If you are saving for retirement your first step should be to join an occupational pension scheme, if your employer offers one, or set up a personal pension. "People always ignore pensions when talking about growth but they are savings vehicles invested primarily for growth," says Mr Dampier.

Invest in stocks and shares or cash through an ISA and, although you won't get tax relief on what you put in, you can take returns free of tax. The maximum ISA investment limit is pounds 7,000 this financial year and pounds 5,000 the next.

Ian Millward, investment market manager with IFAs Chase de Vere, recommends choosing areas that seem likely to drive future international economic growth. "I would look at financial services, pharmaceuticals, technology and emerging markets. These will fuel growth around the world over the next 20 years. I would stick with pooled investments such as unit trusts as these are far easier to organise than trying to become a stock picker."

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Reach Volunteering: Trustees with Finance, Fundraising and IT skills

Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent