Although deposit accounts are a good home for lump sum investment over the short term or for those who do not wish to take any risk at all with their capital, some exposure to other asset classes, for example, company shares, fixed interest securities and property, can significantly increase the potential investment returns, helping to protect your capital against the effects of inflation and increasing its value in real terms. The proportion of each different type of investment held will differ according to the level of investment risk that you are willing to take. Of course, the value of these types of investment can rise and fall and the returns are not guaranteed.
Lump sum investment has the advantage that your capital is invested in the market at a single point in time, unlike when investing on a regular basis where the market could rise as you invest. Lump sum investment enables you to take full advantage of all the increases in investment values after your investment has been made.
Examples of lump sum investments include unit trusts, pension schemes, investment trusts, open ended investment companies (OEICs), National Savings products and investment bonds and by investing in a combination of these, you will gain access to company shares, fixed interest securities, cash deposits, commercial property enabling you to balance your portfolio between the investment returns required and the level of investment risk that you are willing to take.