Short Term & Lower Risk

Short term schemes such as Child Savings Accounts, Adult Savings Accounts and cash ISAs are incredibly popular for many reasons. Most provide the flexibility of instant or short-notice access.

But the real attraction is that they attract little or no risk to your money.

Unlike stockmarket investments which may erode your capital, low risk savings will preserve the money you pay in, even when the economy is in the doldrums. Their returns may not be as exciting as higher risk investments but they can deliver steady interest.

Longer Term & Higher Risk

Longer Term schemes include Unit Trusts and OEICs, Investment Trusts and Stocks and Shares ISAs. There is a good reason why these investments are usually able to provide impressive returns. And that is risk.

Exposing money to increased risk can bring much higher rewards. The key to investing successfully is to understand and be comfortable with the risk attached to your investment vehicle and to be prepared to commit your cash over the mid-long term so that the effects of any ups and downs in the stock market can be evened out.

Unless it specifically says so, an investment return is not guaranteed. But if you are prepared to run the risk of your capital being eroded in the bad times then you can almost certainly reap great rewards during the good times.