Choosing a company

Your key choices

There are hundreds of investment companies to choose from, but you can narrow down the choices by being clear about why and how you are investing.

What do you want from your investment?

Do you want a regular income or are you putting money away for the long term so it can grow – or do you require a combination of income and capital growth?

Some investment companies are specifically designed to pay income in the form of dividends, others focus on capital growth over time, and some aim to provide both.

Will you invest a lump sum or make regular payments?

If you have a lump sum, you can invest directly (or via a wrapper product) in an investment company. If you want to make small regular payments, you probably need to consider investing in a wrapper product such as an ISA or an investment scheme.

One of the advantages of regular saving is known as "pound-cost averaging": you avoid the risk of buying all the shares in one go when the price is high.

How much risk do you want to take?

Roughly speaking, the level of risk you might be prepared to accept depends on how long you can afford to tie up the money. If you've got time on your side, you can view your investments over the longer term. You may be able to take relatively more risk in exchange for the potential of higher returns. However, it is important to remember that this sort of investment is for the long term.

Do you want to invest in a particular sector?

Many investment companies only invest in a specific sector, which allows you to pick a particular part of the world or type of company to put your money into.

Risk versus reward