There is a vast array of financial products on the market today making the process of analysing and planning you financial future complex and challenging. Whatever your means, and whether you are looking to save on a regular monthly basis or to invest a lump sum of capital, it is important to realise the options you have available and the risks associated with each.

Equity-based investments in particular are intended as medium to long-term investments (usually considered to be five years or more). Because they are equity-based, they are dependent on stock market movements. It also means your capital is not usually guaranteed to be safe and so you may lose some or all of it.

If the investment is a unit-linked one, its value can reduce in direct relation to the stock market prices of its underlying assets, although it can also rise. This means you may not get back all the money you invested. If it is a with-profit arrangement, there is not the same direct link between the underlying assets and the value of your policy. This is because the insurance company holds back some profit from good years to offset losses in poor ones - this is referred to as smoothing. The provider cannot withdraw any reversionary bonuses declared, although your early withdrawal may result in a Market Value Adjustment - effectively a financial 'penalty'.

Banks and Building Societies
It is possible to set aside a reasonable amount of cash for emergencies - car or house repairs, for example. Bank and building society accounts can offer instant access and are ideal for such 'rainy day' monies. Fixed notice accounts similarly allow monies to be deposited at higher rates of interest where the date on which funds will be needed is known in advance - to pay for a holiday perhaps. In the long term though, bank and building society returns are unlikely to match those offered by stock market backed investments, although this may not be true always. However, the risks associated with such investments are different.

National Savings
National Savings products offer total security for any capital you invest. Income Bonds can be ideal for both non-taxpayers and basic rate taxpayers and pay a regular income.

Investors seeking capital growth can look to National Savings Certificates (NSCs). Available in both fixed-interest and index-linked versions, NSCs combine a guaranteed return with tax-exempt status. The interest rates on offer however should be compared with other products. Because NSCs are tax-exempt, there are limits on the amount you can invest in the different types of National Savings bonds and certificates.

Individual Savings Accounts (ISAs)
Individual Savings Accounts (ISAs) are intended to encourage saving by those of even the most modest means. ISAs are tax efficient so investors pay no income tax or capital gains tax on returns. Comprising up to three separate elements which can be taken out separately (Mini-ISAs) or as one (Maxi-ISA), ISAs offer a choice of investments in:

• Cash deposits through banks, building societies and cash investment funds.
• Life Assurance - specialised life contracts run by life assurance companies.
• Stocks and shares, including collective investments such as unit trust.
• You cannot invest in both a Maxi and a Mini ISA in the same tax year.

Levels and bases of, and reliefs from, taxation are subject to change and any tax reliefs referred to are the current ones and their value will depend on the circumstances of the individual investor.

Insurance Bonds
Life Assurance company bonds offer a wide spread of investments. Investors can usually move money easily from one investment area to another (although this may incur charges) and realised gains are usually tax free for basic rate taxpayers.

Gilts
Gilts are British Government bonds that can be bought and sold on the stock market. Various types are available, most having fixed redemption dates. A few, issued during times of crisis, are undated and will probably never be redeemed. In the case of dated gilts, the investor knows how much the Government will pay to redeem the bond and precisely when that payment can be expected. In the meantime, investors requiring access to capital can sell them on the stock market. The price obtained may be more or less than the Government would pay on redemption, depending on such variables as interest rates and the rate of inflation. Capital losses are therefore possible. For individuals, gilts are exempt from capital gains tax, so profits are tax-free and losses are not allowable. Any accrued interest in the sale proceeds is liable to income tax.

Levels and bases of, and reliefs from, taxation are subject to change and any tax reliefs referred to are the current ones and their value will depend on the circumstances of the individual investor.

Collective Investments
A Collective Investment is one where many people's investments are pooled into one large fund. A collective investment allows the investor to share in the assets of the fund. Such an investment enables an investor to have a wide spread of investments within one fund.

Open Ended Investment Companies (OEICs), Unit Trusts (UTs) Investments Trust (ITs) & undertakings of Collective Investments & Transferable Securities (UCITS) are examples of collective investments.

Investment Trusts
Investment Trusts are similar to unit trusts in that they offer all investors a diversified portfolio of stocks and shares. Investment trust shares are traded on the stock market and their value therefore rises or falls according to supply and demand.

Unit Trusts
Some 1800 unit trusts and OEICs offer the potential for income or capital growth (or both) from stock market backed investments. Returns are less certain than those from gilts or cash deposits. Risk is generally reduced by the professionally managed spread of the investments within the fund. Unit Trusts can be found which invest in most stock markets and investment types. Unit trusts have two prices, the price at which you buy ("offer price") and the price and which you sell ("bid price"). The difference between the two prices is known as the 'bid offer' spread.

Open Ended Investments Companies
An OEIC, as its name suggests, is a company. To invest in an OEIC you buy shares in the company. Its business is managing the investments of its shareholders. As investors buy and sell shares, the size of the fund grows and reduces. The OEIC does not have a set end date, and is not limited by size. Hence, it is known as an open-ended fund.

The investments making up the fund of the OEIC are valued and each share represents an equal part of the investments. To pay for the research and administration of the investments in the OEICs fund, the company takes an annual management charge. Sometimes a small charge is also levied on buying and selling of the shares. However, unlike unit trusts, there isn't a set bid and offer spread.

Offshore Funds
Many offshore funds are recognised by FSA and operated by subsidiaries of well-known institutions. Such funds are able to offer a wider range of investments than their onshore counterparts owing to the differing regulation offshore. Different types of regulation can mean less security but the very diverse nature of the offshore market means that generalisation can be misleading. A professional Independent Finance Adviser can identify well-run investments that make the most of the tax advantages that offshore regimes have to offer. Income distributing funds pay their income gross which is particularly attractive to non-taxpayers. Where offshore fixed interest funds are structured as companies, investors pay tax on dividends effectively at lower rates than they would with equivalent onshore funds because corporation tax rates tend to be lower.

The Financial Services Authority does not regulate offshore investments.

Levels and bases of, and reliefs from, taxation are subject to change, any tax reliefs referred to are the current ones, and their value will depend on the circumstances of the individual investor.

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