Important investment notes

There are no guarantees when it comes to investing, and the value of the investments in your AJ Bell account(s), and any income you get from them, can go down as well as up.

Although the aim of investing is to grow your wealth, you may not get back the whole amount that you invested.

This page discusses some of the different risks you should consider when choosing and managing your own investments.

Managing your investments

• Stock market investments should be held for the medium to long term (at least five to seven years) as they can be more volatile in the short term, so please make sure that you can invest for this period of time
• We don’t offer advice, so you’ll be responsible for selecting and managing your own investments
• This includes reviewing your portfolio and making any changes you think are needed
• Past performance is not a reliable indication of future returns
• You should make sure you understand the costs and charges you’ll pay for investing, to ensure you’re getting good value from the investments and products you hold
• You’ll receive a contract note when you buy or sell investments, which will detail the charges applied
• If you deal frequently, dealing charges could have a significant impact on your investment returns
• Foreign exchange charges will also apply when you buy or sell international shares, and when we convert dividend and other corporate action payments
• We’ll send you an annual costs and charges statement showing all the charges applied to your account, including charges from fund managers - read more about the costs and charges statement
• The tax treatment of certain accounts depends on your personal circumstances and tax rules could change
• You should ensure you have cash that you can easily access to cover any unexpected expenses in the short to medium term before you start investing

Investing risks

You can deal in a range of investments. Some types of investment carry a higher degree of risk than others.

Cash

Although cash is generally lowest on the risk scale, it does come with a higher inflation risk. Cash savings will rarely bear inflation, meaning the real value of your savings could be eroded over time.

You should also keep in mind the features and limitations of some of the account types on our Cash savings hub. For example:

• Fixed-term and notice savings accounts don’t provide you with instant access to your cash
• For fixed-term accounts, you’ll need to be comfortable that you can lock your money away for your chosen term
• Notice accounts require you to provide a set notice period before you can access your money, and the interest rates on these accounts can change. The notice period for a reduction in the interest rate is the same length as the notice period for withdrawing money

Funds

• Although funds can help you diversify your portfolio, annual fund manager charges can vary considerably. You should read the key investor information document (KIID) before you invest to understand the charges you’ll pay
• If you’re investing in ‘active’ funds – where a fund manager selects a portfolio of investments with the aim of beating the market – there’s a risk that the active fund manager underperforms when compared to the market, or an equivalent passive fund

Investment trusts

• Investment trusts have some extra features compared to investment funds, which could make them more difficult to understand
• They are run as public limited companies, which allows them to borrow money – this can amplify returns as well as losses
• As they are closed-ended (the number of shares is fixed when they launch), demand for shares can influence the price, as well as the value of the assets the trust invests in. The price of an investment trust share might move ahead of the value of the fund itself – known as a premium – or the shares could be trading at a discount to the value of the fund assets

Bonds

• Although bonds come with a promise to repay your money at the end of the term, alongside interest (coupon) over the life of the bond, there are no guarantees
• There’s a risk the issuer of the bond defaults (goes bust) and you lose your money
• When interest rates fall, the price of bonds tends to rise. However, when interest rates rise, the price of fixed-interest investments (bonds) tends to fall
• The price of bonds with a longer term to maturity can be more sensitive to changes in interest rates and inflation
• Credit ratings are not a guarantee or recommendation and can be subject to change

Shares

• If you’re investing in individual shares, there’s a risk that a company you invest in goes bust or performs poorly. This can happen even if the rest of the market is performing well
• If a company has paid dividends in the past, it doesn’t guarantee they will do so in the future
• Smaller company shares can be more volatile and there may be a large difference between the buying and selling prices. Some smaller companies are quoted on AIM or Aquis (AQSE)
• Overseas investments might carry an exchange rate risk and may be based in less well-regulated jurisdictions

The Alternative Investment Market (AIM)

This is a market designed for emerging or smaller companies. These shares carry a higher degree of risk of losing money than other UK shares for a number of reasons:

• The rules of this market are less demanding than those of the official list of the London Stock Exchange
• There’s usually a wider spread between the buying and selling price of these shares, and the shares might be harder to sell when the time comes
• It can be more difficult to obtain reliable information about their value or the extent of the risks to which they are exposed

AIM stocks tend to be volatile high-risk / high-reward investments and are intended for investors with considerable trading knowledge and experience.

The Aquis Stock Exchange (AQSE)

A junior marketplace to the Alternative Investment Market (AIM), the Aquis Stock Exchange (AQSE) offer a place for small and typically less mature companies to trade their shares. Shares listed on Aquis also come with a higher risk of losing all or some of your money.

Companies listed on the Aquis Stock Exchange tend to be at a very early stage of development. They’ll usually have low levels of liquidity and little or no trading history, making them harder to buy or sell.