Professional financial advisers will always look to assess your own attitude to risk before making recommendations and for teachers who are looking for a level of security / lower risk they may often find investment bonds as recommendations. Investment bonds are effectively lump sum investments offered by insurance companies and controlled by their managers. These funds can fall into a variety of categories ranging from low to high risk and, once again, there are numerous variations on the market.
The most common types that you will encounter are:
i) With Profit Bonds
A With Profit Bond is a lump sum investment that the insurance company will utilise and invest subsequently releasing potential bonuses to you on an annual basis. In effect, what they are trying to do is smooth out the peaks and troughs associated with normal investment. These types of contract have been around for many years and are often used in retirement planning.
ii) Distribution Bonds
Distribution bonds are a combination of stocks and shares as well as alternative investments such as fixed interest and index linked gilts. This combination serves as a counter balance whereby when one form of investment is rising the other is often shrinking. This means that, over time, the peaks and troughs normally associated with direct stock market investment can be reduced.
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