THIS WEEKEND you'll see count-less advertisements for different types of investment.

Offers of stock market growth, guarantees, minimum returns, high income and so forth, are common place.

But, in truth, there are only a set number of areas for investment, and according to independent finan-cial adviser Alan Northeast, the vast majority of new products are generally reworks of old ones just with a new wrapper.

One of the most popular forms of investment over recent years, which in reality has been around for a very long time indeed, is the with-profit bond, with its simplicity and effectiveness largely responsible for its success.

The basic areas of investment are stocks and shares, property, fixed interest securities, gilts, cash and venture capital. If you have a large amount of capital you could build up your own portfolio of these which should provide a pretty good balanced return over a number of years. Sadly most of us aren't in that fortunate position, but we can take part in it by joining forces with other investors and entrusting a fund manager to look after the money. This is how a collective investment works, whether it is a unit trust, investment trust, or investment bond, such as the with-profit bond.

Most of us appreciate that we shouldn't keep all our money in a bank or a building society, because after tax and inflation, the real return is just one or two per cent. Naturally we would all like the best possible return with the smallest risk, and with-profit bands can go some way to achieving this. In addition, each year the company calculates its profits and declares a bonus which may be added to the capital investment. The idea is that surpluses made in successful years are held in reserve so that similar bonuses can be maintained in years where overall returns are less.

With-profit bonds offer the potential for long term growth while minimising the short-term risks of investment.

With a possible terminal or loyalty bonus also payable, which rewards people who save for longer periods, this can build up to form a useful buffer to offset against inflation, especially if income is being taken form the fund.

Furthermore, because tax has already been paid by the insurance company there is no further tax to pay for individuals provided they are not higher rate tax-payers in the year of encashment.

Currently, tax is only payable on income taken over five per cent per annum or if it affects you age allowance or you pay higher rate tax. So it is straightforward as far as revenue dealings are concerned, and no capital-gains tax liability will be generated either.

One of the bonds is currently giving returns of up to 10.25 per cent net for the first year, although you should remember that this is a five year investment, and with no initial charge this is proving very popular indeed.

Details 01703 363640. Mr Northeast is an independent financial adviser with Northeast and Thakrar, of Bedford Place, Southampton.

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