Where should you place your lump sum investment?

With the stock markets slumping and interest rates at rock bottom, savers are having a tough time of it. Look around though and it is possible to find some advantageous returns on a lump sum investment.

Fixed rate bonds have been popular at a time when riskier investments have scared a lot of savers away from the markets. With the Bank of England base rate at a record low of 0.5% and likely to stay there for several more months, getting decent returns isn't straightforward.

The best offers are invariably for longer-term bonds. If you are prepared to tie your money into a bond for a long period, the best rates available over 5 years is currently 4.75% (with the ICICI bank) and over one year it is 3.1%.

Several institutions, like the Barnsley Building Society (www.barnsley-bs.co.uk) and Nationwide (www.nationwide.co.uk) offer similar rates on shorter term bonds, but they are changing all the time, so check the best offers at a website like www.moneysupermarket.com.

If you are feeling ready to dip your toe into the stock markets, despite recent crashes, there are plenty of expert analysts who will back you up, with some estimates suggesting that stocks are undervalued at present, and that markets will soon start climbing again.

There are slightly less risky ways of investing in the markets. The Meteor FTSE Income Deposit Plan 2, offered by the Fair Investment Company (www.fairinvestment.co.uk) is a 6 year capital protected deposit plan with the potential to provide a fixed annual income of 7.50%, or a quarterly income of 1.5%. Your initial deposit is safe and will be returned in full at maturity. You receive the fixed annual or quarterly income if the FTSE 100 Index does not fall lower than 4,500 or rise more than 7,500. If this happens income will not be paid for that quarter or year.

Other institutions offer similar schemes, offering limited profits on a rising market, but the security of safe capital if the markets plunge. They provide your lump sum investment with the opportunity to soar, but with a safety net.


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