What is investing?
Investing is a service provided by investment banks or high street banks to customers who want to have an investment portfolio managed for them.
They choose to place their investment with the bank rather than to manage their investments themselves or to use another, specialized sort of investment directly, such as a hedge fund. Many banks have access to a vast range of investments which cover almost all possibilities.
What investments might be offered?
- ISAs – Most banks offer a range of ISAs. These are tax-efficient ways of investing a limited amount of money – up to GBP7,000 per year.
- Investment Bonds – Offered by most banks – they can yield pure growth or can be invested for income only, or a mixture of the two. An investment bond is linked to the stock market. This means that its’ monetary value can go down as well as up.
- Investment Funds – This is when an individual joins with a number of others to make an investment in a fund that already exists. It is normally managed by a fund-management company or, more rarely, an individual. The fund invests in stocks and shares and, again, it is possible that the value of the fund can go down as well as up. Various funds exist, some spreading their risks across different markets, others focusing specifically on a particular area, such as Far East or ethical investments.
- Share-Dealing Service – Offered by most banks, enabling the customer to buy and sell shares in individual companies. There is usually a small fee for doing this. Many branches of high street banks offer this and, for some banks, it does not matter if the person does not have an account with the bank. Many banks offer this service on-line and via the telephone.
- Larger Investments – Many banks also offer advice from an investment planning manager for those with larger investments. This service comes free in some cases, with the private banking offered to wealthy individuals.
- Money Market Investments – Many banks offer a service which invests in the money markets and offers a fixed rate deposit for a fixed period of investment, typically from one day to five years. Usually a minimum sum such as £50,000 has to be invested.
The specialist merchant and investment banks offer a service which goes beyond what the high street banks can offer in terms of variety of offerings and specialisation of products for the customer to choose from.
They are geared up to helping wealthy individuals and companies achieve a very specific result from their investments and do this by focusing only on investments, rather than being providers of a broad range of services for the many, like the high street banks.