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Despite the market turmoil, I am now in a position to be able to invest in the equities for the first time. What are the different options available to me and how much do the different options cost to invest?

There are a number of options available to you and the right one for you will depend on a number of factors.

What involvement do you want to have in the decision-making process? Do you think you can do it yourself?

Some people can and, as well as making good profits, can also get some enjoyment from doing so. If you do want to DIY, then online share trading platforms are available, usually at a fixed cost per trade. You have to do all the research and selection yourself.

If you are not so confident and want to employ an expert, then you have two choices.

The first is to employ a stockbroker or discretionary fund manager and get them to create and build a portfolio for you. They will probably only find you attractive as a client if you have over £100,000 to invest, some will expect you to have far more than that.

Value can be determined not only by the investment results they achieve but also by flows of information and review services. You probably will want to choose someone in whom you have confidence and who has a published or agreed service schedule.

There is nothing worse than not hearing from your adviser during difficult times like this when you may need reassurance and advice.

Alternatively, you might seek out a competent independent financial adviser and you will need to select one with suitable experience and qualifications as well as a thought-through proposition.

An adviser is more likely to recommend collective investments where you have a wide spread of shares and might use unit trusts, investment trusts, open-ended investment companies and/or insurance company funds to build a suitable portfolio for you.

Regardless of which route, you and your adviser, if you use one, will need to determine the most suitable tax wrapper and products to match your investment goals and objectives as well as your determined attitude towards investment risk reward and volatility.

What will it cost you? It depends. It depends on whether or not you employ an adviser or manager to help you.

If we look at the independent financial adviser, cost will also depend on whether the adviser charges for his services through commission or fees.

You should expect to have to pay something for advice. If you pay a fee to your adviser, he may charge this directly to you by invoice or may agree with you that the advice fee is taken from commission payable by the selected product manufacturer.

You should know exactly what you are expected to pay and for what service.

Product providers typically charge an up-front charge usually expressed as a percentage of the amount you invest. There are then ongoing charges usually in the form of an annual charge.

Passive equity investment funds usually have lower annual charges than more actively managed equity funds.

Some investment products have a more opaque charging structure where the amount of your investment is shown as one figure and the amount you get back is different, typically lower because of some form of exit penalty. How dare you have the nerve to want your investment monies back. Avoid these types of product if you can.

Nick Bamford is joint managing director of Informed Choice


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