'Gilts' or 'Gilt-edged securities', which are loans made to the British Government. They are a very safe investment if held to maturity (i.e. until the Government repays the loan). Most carry interest at a fixed rate so may be suitable if you think interest rates will fall. There are others linked to indices such as the retail price index ('RPI') which provide protection against inflation. The amount you will receive on sale will vary depending upon the relationship between market interest rates and the fixed rate attached to the Gilt, and the time to maturity. Gains on sale are tax-free.
Corporate bonds are loans made to companies. They pay relatively high rates of interest compared to deposit accounts but tend to be higher risk investments as repayment depends upon the success of the company concerned. Usually the higher the interest rate, the higher the risk.
Preference shares rank between corporate bonds and ordinary shares on the risk scale. They tend to carry a fixed rate of dividend that will be paid before ordinary shareholders receive any return. They tend not to participate in the growth of the company.
Ordinary shares (or 'Equities') are a part ownership of a company, they fully participate in the company's ups and downs. Returns are received through dividends or through a sale on the stock market.
Penny shares are ordinary shares whose price is very low. These are high-risk investments because even slight changes in price can result in high percentage gains or losses.
If you are seeking information about what to look out for when choosing shares, click on 'Choosing Shares'.
Point to Watch: Ordinary shares in particular are a popular investment. Picking individual shares can be rewarding but you should be aware that share prices fall as well as increase.
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Choosing Shares
