At the core of all investments are four key assets:


Where you lend your money to a bank and they pay you interest on it.

Fixed Interest

Including Corporate Bonds and Gilts. Where you lend your money to a company or other public body and receive regular interest payments on your investments. The capital value of the bond is normally fixed at its maturity date, but prior to that can fluctuate with market movements.

Equities (Shares)

Where you buy a part of a company, and as a shareholder receive a share of its profits as dividends. The value of shares varies with the performance of the company.

Property & Commodities (oil, gold, copper etc)

Tangible assets such as “bricks and mortar”; the most significant probably being your home.


All other investments and investment products are derived from the above assets, and are often designed to reduce risk or improve return. For example OEICs are simply pooled investments in shares, bonds and cash.


What is it?

Open Ended Investment Companies (also known as Investment Companies with Variable Capital) are collective investments that invest primarily in cash, shares and bonds as per the objective of the fund. The unit value reflects the underlying net asset value (NAV) that the fund holds (in contrast to Investments trusts).

Why should you invest in it?

It represents a low cost way of investing in a diversified portfolio of assets, which helps to reduce investment risk. There is a large selection of funds covering many different geographical and industry sectors, this would be difficult and expensive to achieve by investing directly into the underlying shares. It’s also very easy to switch between funds, particularly on a platform, and this makes portfolio management much easier.

How can you invest in it?

Directly into OEICs or via wrappers such as ISAs and pensions, all of which are available via our platform. Many pension and life assurance funds also invest in OEICs and they therefore represent the core of many people’s total investments.

Investment Trust

What is it?

Investment Trusts are closed ended collective investments that invest primarily in cash, shares and bonds. The unit value does not always directly reflect the net asset value (NAV) of the underlying assets, but will include a market driven element, which means that the shares often trade at a premium (above) or discount (below) its NAV. A key difference with OEICs is that an Investment Trust can borrow money to invest, which increases its leverage and hence the risk of the portfolio.

Why should you invest in it?

As with OEICs it represents a low cost way of investing in a broad portfolio of assets. The total costs are often slightly lower than OEICs although the range is smaller and dealing costs are often slightly higher. Investment Trusts are often slightly more volatile than OEICs as they can borrow money to invest (leverage) and the NAV doesn’t always equal the underlying assets. 

How can you invest in it?

Cavendish Online currently offer more than 50 Investment Trusts through FundsNetwork. For more details please click here

ISA / Junior ISA

What is it?

Individual Savings Accounts (ISA) and Junior Individual Savings Accounts (JISA) are tax efficient wrappers (accounts) for holding cash or other investments available to UK tax residents. They can hold after-tax income in an income and capital gains tax free environment and you retain full access to your money at any time. There are limits to how much can be invested in any single tax year. The 2018/19 tax year limits are £20,000 for a Stocks & Shares ISA and £4,260 for a Junior ISA.

Why should you invest in it?

There is rarely a reason not to utilise your ISA allowance up to the annual limits each year. There is often no additional cost to using an ISA compared to direct investment into an OEIC. We have many clients who have gradually built up their whole portfolio in an ISA wrapper, and will be able to enjoy a tax free income or gain from their portfolio when they desire.

How can you invest in it?

ISAs and JISAs are the most popular routes to invest in OEICs on our platform.
(This doesn’t include a Cash ISA option).


What is it?

A pension is tax wrapper for holding the same underlying assets that we have covered, but predominately OEICs. The taxation is different to ISAs in that your contribution is paid from your pre-tax income and hence receives tax relief. The pension is not subject to income or capital gains tax whilst it grows but is restricted at retirement, after age 55, when the investor is able to withdraw 25% of the fund without liability to tax and the remainder will be broadly taxed as income.

Why should you invest in it?

Pensions are a tax efficient way of saving for retirement.

How can you invest in it?

To see the current products available please click here

SIPP (Self-Invested Personal Pension)

What is it?

A SIPP is essentially a pension wrapper that is capable of holding investments and providing you with the same tax advantages as other personal pension plans. You can choose from a number of different investments, unlike other traditional pension schemes; giving you more control over where your money is invested.

One of the major advantages of a SIPP is that you can transfer in other pensions; this allows you to consolidate and bring together your retirement savings. Making it simpler for you to manage your investment portfolio and making regular investment reviews easier. A SIPP can be held alongside other personal and occupational schemes, providing that your total contributions are within limits laid down by the Inland Revenue.

Why should you invest in it?

SIPPs were primarily designed for people who want to manage their own retirement fund by having a broader range of investments to choose from. If your retirement planning needs are slightly unusual or you simply want more flexibility about the investments you make then a SIPP may be an attractive alternative to more traditional pension arrangements. Historically they have been more expensive than personal pensions, but they are becoming more competitive all the time.

As with any pension fund, you cannot take money from the fund until age 55. Once you have reached retirement age you can draw an income from your pension fund rather than buying an annuity straightaway.

How can you invest in it?

Cavendish Online offers the FundsNetwork Pension. For more details please click here

VCT (Venture Capital Trust)

What is it?

Venture Capital Trusts (VCTs) are an investment created by tax legislation in 1995. They are investment trusts that invest in very small companies that are usually looking for money in order to further develop their business.

Like a standard investment trust, a VCT has its own listing on the stock market so investors can buy in. But because VCTs invest in very small companies which are in the early days of developing as businesses, they are inherently higher risk than a standard investment trust.

Why should you invest in it?

Tax payers receive an income tax rebate of up to 30% when investing in a VCT. You can invest up to £200,000 a year in a VCT and receive income tax relief on the entire sum – although obviously you cannot receive more in rebates than you have paid in income tax (so if you’ve only paid £5,000 in income tax that year, that is all you can get back). You can claim the relevant tax rebate on your tax return under the special VCT section. Please visit the HMRC website for more details.

How can you invest in it?

To see the current products available please click here

EIS (Enterprise Investment Scheme)

What is it?

The Enterprise Investment Scheme (EIS) is designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase shares in them.

Why should you invest in it?

There are tax incentives if you choose to invest in an EIS, but they are high risk and you could suffer capital losses. For more a more in-depth guide we would recommend visiting the HMRC website.

How can you invest in it?

Our EIS page is currently under development but will be available shortly.

SCARPs (Structured Capital At Risk Products)

What is it?

Structured capital-at-risk products (known as SCARPs) aim to return the original money invested at the end of the term unless the index or asset price to which the product is linked has fallen below or risen above a predetermined threshold. If this happens you can quickly lose some or all of your original money. (For this reason, if you decide to invest in fixed term investments / structured products they usually form only a small part of a balanced investment portfolio).

Why should you invest in it?

Structured Products can provide investors with features that cannot be achieved through “standard” investments such as shares or bonds. For example, some Structured Products provide protection against drops in share prices; some deliver returns that increase faster than share prices themselves; and some can provide positive returns even if share prices do not increase at all. There is also a risk that you could lose some or all of your investment

How can you invest in it?

To see the current products available please click here

ETFs (Exchange Traded Fund)

What is it?

An ETF is an investment fund traded on stock exchanges, much like shares. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index, bond index or a commodity such as gold or oil.

Why should you invest in it?

ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features. ETFs are the most popular type of exchange-traded product.

How can you invest in it?

There are currently around 80 ETFs available on our platform.

Investment Bonds

What is it?

Investment bonds are life insurance policies, in which you can invest a lump sum, which goes into a variety of funds. They’re not the same as corporate bonds, premium bonds or fixed-rate bonds. In fact, strictly speaking, investment bonds are not really bonds at all – they are effectively a type of investment fund operated by life insurance companies. You have a choice of two types of funds within investment bonds – with-profits or unit-linked. Both have the same tax rules: tax is paid on both growth and income accrued in the fund by the insurer.

Why should you invest in it?

You can choose to invest in a range of funds; you can choose a portfolio, or you can choose a mixture of both. You can usually switch between funds within your bond. There are also tax planning benefits associated with Investment Bonds and regular withdrawals can often be taken.

How can you invest in it?

To see the current products available please click here

Assessing your risk

We all have varying attitudes to risk and ideas of what is risky and what is not. To help determine which of our model portfolios might he appropriate for you, our risk analyser provides a fast, simple way to gauge how much risk you might be comfortable taking. Simply answer the following 4 questions:


Our risk tool is provided for guidance only and does not constitute advice. You should always ensure you're comfortable with potential risks before making an investment. We cannot guarantee the portfolios won't lose more than the stated amounts, especially during extreme market conditions. 

1. Aside from your mortgage, do you have other outstanding debts (e.g. credit card, personal loan)?

2. Do you have safe rainy day savings to fall back on if required?

3. How long can you invest for?

4. If markets tumble how much could you potentially stomach losing?

How to select your funds


Do you require an income?

If yes, then beware that not all funds pay an income. And, of those that do, some are better suited to the job than others. For example, a UK equity income fund will tend to deliver a higher consistent income than a FTSE 100 Index tracker fund. Income producing funds can also be used for growth, by re-investing income back into the fund.

ACTION: If you require income you can generally disregard growth orientated funds, depending on the level of overall income you require.


How much risk are your comfortable taking?

Some funds are more risky than others, i.e. there's a greater likelihood of larger gains or losses compared to a lower risk fund. The types of underlying investments held in a fund will affect risk, for example funds investing in stock markets tend to be more risky than those investing in corporate bonds. And so will the manager running the fund, for example one stock market fund manager might take bigger or smaller risks than another.

ACTION: Avoid funds that are likely to be more risky than you're comfortable with. A simple measure of potential risk is a fund's standard deviation, the higher the figure the more widely the fund has fluctuated in the past.


How will they fit in with your existing funds?

If you already own funds, consider how the new ones will fit into your portfolio. For example, if you already own a number of UK stock market funds, buying another might simply replicate a lot of what you already own. Factors to consider include the asset types held by funds (e.g. stock markets, corporate bonds, property etc), where the fund invests geographically and whether the fund has a specific focus (e.g. income, or investing in smaller companies).

The key is get a good overall balance that fits in with your plans and the amount of overall risk you're comfortable taking.

ACTION: Consider how any new funds will fit into your existing portfolio.


Active or passive?

Active fund managers use their skill and judgment to buy and sell investments in the hope of making a decent profit. The trouble is, a lot of them aren't very good and in some cases they probably would have done better by picking stocks out of a hat.

Passive (tracker) funds simply try to mirror a specific investment index, for example the FTSE 100. They're effectively run by computer so costs are normally low. In practice they tend to beat the majority of fund managers but lag the more successful funds.

For most investors a combination of active and passive is a sensible strategy.

ACTION: Strike a balance between active and passive funds that you're happy with.


How good is the fund manager?

Actively managed funds are only as good as the manager running them. While past performance is not a reliable guide to future returns, managers who have performed consistently well versus peers in the past are probably more capable than those that those who've performed poorly.

When analysing past performance it's sensible to consider year by year returns rather than single three or five year periods. The problem with the latter is that one (lucky) good year could mask otherwise poor performance.

ACTION: Review the manager's track record when seriously considering a fund.


Are charges reasonable?

Fund charges shouldn't dominate your decision, but it's important to ensure they're not excessive. The higher a fund's annual charges, the more successful the manager will need to be to outweigh them.

ACTION: Check annual fund charges are not excessive.


To research the various funds on the Cavendish Online FundSupermarket please click here