Should I invest in Enterprise Investment Schemes (EISs)?

Do you know of the EIS or Enterprise Investment Scheme? It's a scheme that is run by HMRC to help higher-risk, recently launched businesses that are seeking to raise more funds by giving investors an incentive of tax relief at the rate of 30%. It says HMRC but it's run by independent companies. I was just reaching out to ask if this kind of investment was familiar with you and if so would you be able to recommend a trustworthy investment company?

From your email, I think you should stay clear of these.

I’ll tell you why – you say you are looking for a short-term investment, but these types of investments are long-term and really only for more experienced investors who know what they are getting into. EIS does make investing in early-stage businesses appealing to people with lots of money who are seasoned investors and in no rush. But by definition, a lot of small businesses fail so it’s very high risk.

If you want a lower-risk way to investigate, look at Crowdcube, who let you participate in a few schemes like this (they have EIS-eligible businesses), and you can often start with quite low sums of money. But I would not treat this as a significant investment - more a play on the side.

If you are coming up to retirement, it’s likely that the ‘boring old pension’ will be one of the most tax-effective things you can consider, and it will be typically lower-risk. If you’re unsure about investing, I would not go down the EIS route but keep it a bit more pedestrian and safe instead.