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
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower