In this task, I will look at the alternative methods of investing 50,000.

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Gurveer Saggu

In this task, I will look at the alternative methods of investing £50,000. I have found that investing £50,000 into the stock exchange has been very risky as the shares vary which may result in risky investment and cause the value of shares to decrease. Therefore, I feel that investing this money into the stock exchange is not a suitable investment. Other investments are considered on the following pages. I will summarise each possible investment and its aspect. These investments also hold risks but not to the degree of those of the stock exchange. These investments include banking, investing in a property, a business or industry and automobiles etc.

In a nutshell, investment trusts are companies that invest in the shares and securities of other companies. They pool investors’ money and employ a professional fund manager to invest in the shares of a wider range of companies than most people could practically invest in themselves. This way even people with small amounts of money can gain exposure, at low cost, to a diversified and professionally run portfolio of shares, spreading the risk of stock market investment. There are over 300 investment trusts responsible for the management of billions of pounds’ worth of assets on behalf of investors.

Banking

The most common of investing money is in banks or building societies. Many people invest in here as the risk of losing or a decline in their investment is very unlikely. An almost certainty is that the money deposited will increase depending on the time it stays in the account. At the end of all the banking methods, I will produce a table showing profit made from each account.

The formula used to work out the profit made on each account is:

The top line multiplies the investment amount by the interest rate. Then you divide it by 52 (weeks in a year). Finally, multiply it by 10 (the monitoring period). This gives you the profit made on the account. You must then add this amount to £50,000 which will give you the total profit made. I will use this formula to investigate the total profit made on each account

Different types of bank accounts are listed on the following page.

 

Current Accounts        

These bank accounts are designed to provide easy access to the accounts. They offer easy access to withdrawals and deposits of cash into the account. Most of these current accounts offer standing orders and there are unlimited amounts of debit that can be made. Interest on current accounts with overdrafts is generally lower compared to those without overdrafts.

Current accounts without overdrafts normally have a higher interest rate but it will only apply when a certain limit of money is reached. Choosing to invest in HSBC for my current account, would result in me making £961.54 profit.

 

Basic Bank Accounts

These types of accounts are designed for people who have never had a previous account or credit history whatsoever. It does not provide an overdraft facility and most of the time does not provide a chequebook. These types of accounts are available to everybody who is over the age of 18. It is available from many sources such as the Internet and post offices.

Bond Account

Bond accounts pay high competitive rates. Keeping in mind that to earn the high rates of interest this account can provide, you must commit for the entire period of the term. Once the money is invested it is not possible to make partial withdrawals, you should consider another type of account if you wish to make a withdrawal. If the bond is for less than £50,000, you can close it before the end of the term, but I will be charged a fee to cover the costs. The minimum investment in HSBC is £60, whereas in Natwest it is £100.

Making an investment for 10 weeks is not possible as bond accounts are meant to mature for at least one year. Another alternative to a bond account is a HSBC money market, which is basically a higher value bond account.

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Regular Savings Account

These accounts are designed to persuade people to regularly save in their accounts. They require a monthly investment and this value can vary if it is decided. Many saving accounts do not permit lump sum payments and generally prefer instalments. Permission to access savings accounts is different to those of other accounts, some may require a certain period of time to elapse or others may require notice. Others may be fixed term, which means that the amount may only be accessed at the end of the phase.

Interest rates ...

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