Investment types

The following are highly simplified definitions of different investment product types. They're not regulatory definitions, and should not be relied upon. If you are uncertain, seek independent advice from a regulated adviser. The value of all investment products can go down as well as up, depending on investment performance.

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Bitcoin (crypto asset)
A type of unregulated crypto asset that is bought and sold on a particular cryptocurrency exchange. Crypto assets can be highly volatile.

Bitcoin cash (crypto asset)
A different product to Bitcoin, but still a type of unregulated crypto asset that is bought and sold on a particular cryptocurrency exchange. Crypto assets can be highly volatile.

Bonds
A type of debt instrument that is like having an IOU from the company that issued the bond. An investor loans a sum of money in return for the repayment at the specified maturity date. Usually, the investor also receives periodic interest payments (called coupons) during the bond's term. The risk typically depends on the creditworthiness of the particular company that issued the bond.

Certificates representing certain securities
Certificates or other instruments which confer contractual or property rights.

Collective investment schemes
A type of pooled investment where profits or income are shared between the investors Usually managed by a fund manager. The risk depends on what types of asset the fund has been invested in (e.g. bonds, equities, cash, property, other asset types).

Unauthorised collective investment schemes (UCISs) may invest in riskier assets or use riskier investment strategies than UK authorised or foreign ‘recognised’ collective investment schemes. You can check the FCA Register to find out whether a particular collective investment scheme is authorised or recognised.

Contracts for difference (CFDs)
A complex investment that is essentially a contract between a buyer and a seller, where the buyer must pay the seller the difference between the current value of an asset and its value at contract time. Neither owns the asset. 

The investor is effectively betting on the upwards or downwards movement of the asset's price. They can be highly volatile and losses can exceed the initial amount put in by the investor, so investors could be required to make further payments.

Crowdfunding P2P lending
Lending money to individuals or companies via an intermediary. 

Crypto assets/cryptocurrency
Crypto assets are complex cryptographically secured digital representations of value or contractual rights that use some type of distributed ledger technology, such as blockchain.  They can be transferred, stored or traded electronically. They are typically unregulated (see the FCA website) and can be highly volatile.

Debentures
A type of debt instrument that is like having an IOU from the company that issued the debenture.  An investor loans a sum of money in return for the repayment at the specified maturity date. Usually, the investor also receives periodic interest payments during the debenture’s term. The risk typically depends on the creditworthiness of the particular company that issued the debenture.

Derivatives
A type of complex financial contract where the value is dependent on an underlying asset, group of assets, or benchmark. Value depends on fluctuations in the underlying asset. They can be traded to try to hedge against risk, they can be highly volatile.

Emissions allowances/auction products
Emission allowances (e.g. relating to the emission of carbon dioxide), including those offered on an auction platform.

E-money
Unlike a deposit with a bank or building society, E-money is an electronic payment product where the value is held electronically on the payment instrument itself. This might include monetary value stored on a prepaid payment card, in an account on a personal computer, or on a plastic card that uses magnetic strip technology.  

Endowments
A long-term investment product that also includes a life insurance policy. An investor typically pays in a set monthly amount for a set term to get a cash lump sum at the end of the policy, e.g. with the aim of paying off a mortgage.

EOS (crypto asset)
A type of crypto asset that is bought and sold on a particular cryptocurrency exchange. Crypto assets can be highly volatile.

Ethereum (crypto asset)
A type of crypto asset that is bought and sold on a particular cryptocurrency exchange. Crypto assets can be highly volatile.

Fixed interest securities
A debt instrument such as a Bond, Debenture, or Gilt, which pays a specified rate of interest that does not change over the life of the instrument.

Futures
A type of complex financial instrument called a Derivative where the parties have to buy/sell an asset at a predetermined future date and price. The buyer must purchase or the seller must sell the underlying asset at the set price, regardless of the current market price at when the trade takes place.

Gilts
A type of debt instrument, like a bond, but issued by a government rather than by a company. The risk depends on the creditworthiness of the particular government that issued the gilt. Depending on the issuer, gilts are generally considered less risky than corporate bonds, but interest rates may not be as competitive.

Government bonds/securities
Another name for Gilts.

Investment funds
A way of investing money alongside other investors to benefit from the advantages of working as part of a collective group, such as economies of scale and increasing diversification.  

Decisions about how a fund's assets are invested are made by the fund’s manager rather than by the individual investors. Investors might choose a particular fund based on its stated goals, risks or fees. 

A huge variety of funds are available. The risk depends on each particular fund’s investment strategy and the types of assets it invests in.

Life policies
An insurance policy that pays out whenever that person dies. To keep the payments the same during the length of the policy, early payments are invested by the insurance company, which if the policy is surrendered early, may be available to the policyholder.

Mini-bonds
A type of Bond. There is no formal definition but they tend to be illiquid and high risk (see FCA website).  They may just be described by the seller as a ‘bond’.

Non-fungible tokens (NFTs)
A type of complex digital token and unregulated [Crypto asset] which acts as a digital certificate of authenticity that could relate to images, music, videos, books, virtual land and even tweets.

Open-ended investment companies (OEICs)
A type of Investment Fund structured as a company, whose share price depends largely on the underlying assets of the fund. They are called "open-ended" because the company can create new shares to meet investor demand, and can cancel shares of investors who exit the fund.

Options
A type of complex financial instrument called a Derivative where the buyer has the option, but not the requirement, to buy or sell the underlying asset. 

Peer-to-peer loans (P2P)
Lending money to an individual or a business at an interest rate through a specialist platform, typically a website, which connects lenders to borrowers.  The risk for the lender mainly depends on the creditworthiness of the borrower(s).

Ripple (crypto asset)
A type of Crypto asset that is bought and sold on a particular cryptocurrency exchange. Crypto assets can be highly volatile.

Rolling spot forex contract
A type of complex investment, either a [Future] or [Contract for Difference], where the underlying asset that determines the value of the investment is foreign exchange (Forex).  They can be highly volatile.

Shares
Shares represent a unit of ownership in a particular company.  Common shares enable voting rights and the possibility of returns through share price appreciation and/or dividends paid by the company (e.g. from any profits).  The risk depends on the share price of that single company, so risk is more concentrated than in an [Investment fund] for example.

Spread bet
A complex investment that is essentially a contract between a buyer and a seller, where the buyer must pay the seller the difference between the current value of an asset and its value at contract time. Neither owns the asset.

The investor is effectively betting on the upwards or downwards movement of the asset's price. They can be highly volatile. Losses can exceed the initial amount put in by the investor, so investors could be required to make further payments. 

Tracker funds & Exchange-traded funds (EFTs)
An EFT is a pooled investment that tracks a particular market or commodity or fund. They can be bought and sold on a stock exchange and their price fluctuates.

Unit trusts
An unincorporated Investment Fund that holds assets and provides profits that go to individual unit owners instead of reinvesting them back into the fund.  A unit trust is established under a trust deed, effectively with the investor as the beneficiary of the trustt.

Unregulated Collective Investment Schemes
An unregulated type of Collective Investment Scheme. Unauthorised collective investment schemes (UCISs) may invest in riskier assets or use riskier investment strategies than UK-authorised or foreign ‘recognised’ Collective Investment Schemes.  You can check the FCA Register to find out whether a particular collective investment scheme is authorised or recognised.

Warrants
In the context of derivative products, warrants are a type of complex security, usually issued with another security, such as [Bonds] or [Shares], that entitles the holder to buy a proportionate amount of that other security at a specified price, usually higher than the market price at the time of issuance.

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