Investors should only invest in a VCT if they understand the nature and risks inherent in such an investment and, if appropriate, have sought professional advice.
VCTs are particularly suitable for:
- Higher rate taxpayers prepared to allocate a proportion of their investment portfolios to higher risk investments.
- Investors prepared to accept a higher than average risk than other collective investments, for potentially higher post tax returns.
- Individuals who have used up their annual ISA allowances or are investing the maximum allowed in their pension plans.
Private investors should always seek advice from an independent financial adviser ('IFA') when considering investing in a VCT. The FSA expects IFAs to provide their clients with sufficient information to explain the particular risks of VCTs and ensure a balanced view of investing in such funds. Should you have any queries with regards to VCTs, please contact us.
Investors should be aware that an investment in a VCT carries higher risks than many other forms of investment. In addition, the value of an investment in a VCT may go down as well as up and investors may not get back the full amount invested, even after taking into account the available tax reliefs. VCTs usually trade at a discount to their NAV. It may be difficult to sell shares in VCTs and they should be considered long term investments.