Investing offers the opportunity to grow your money faster than if would in a generic savings account. However, that opportunity does not come without risk. It is important to understand the fundamentals of investing to give yourself the best possible chance of making returns on your capital.
What is an investment?
When people hear the terms ‘invest’ or ‘investing’ they typically always think property or the stock market. Whilst these are viable ways to potentially make your money work harder for you, there is more to consider. Some of the most common investment vehicles include:
- Shares
- Bonds
- Funds
- Property
- Peer-to-peer lending
However, there are investors who prefer something a little different, such as antiques, wine or art.
There is no right or wrong when it comes to investing. Each investment comes with an associated level of risk. It is down to each investor to understand what level of risk they are happy to accept to grow their money.
Should I invest?
Investing can be a complicated world at first and sometimes it can be best to seek the help of an independent financial advisor to guide you. They will be able to assess your finances and discuss your goals and risk level with you. This can help you make the best informed decision with the aim of boosting your finances.
Investing isn’t right for everyone. Fortunately, there is a wide variety of investment products available, meaning there can be something to suit most investment appetites.
How much should I invest?
Many people assume that to invest, or to become a successful investor, you need to be rich. The purpose of investing is to give yourself the chance to make the most of your cash and this can start with even the smallest amount. Whether you’re investing £10 or £100,000 – it boils down to where you want to start your investment journey.
There are many theories out there as to how much of their wealth one should invest; some follow the ten per cent rule while other will never invest more than they can afford to lose. If you’re unsure how much you should be investing, the best place to start would be to consult an independent financial adviser who can provide impartial advice to your personal circumstances.
How long should I commit to investing?
With a vast array of investment options, another factor you will want to consider is how long you commit your funds to an investment. Some investments will allow you access to your funds while others may not. Some may allow you to do so but for a fee. Typically the length of an investment bares impact on the advertised rate of return; the longer the investment, the higher the rate of return.
It’s also important to consider that some investments offer fixed rates while others are variable. On the the latter, many financial experts suggest that five to seven years is a happy average investment period. This is because it gives your money the opportunity to ride out any short-term financial dips
How do I know what to invest in?
You can lose your money when you invest, regardless of whether you opt for a low risk or high risk opportunity or product. Therefore, choosing what type of investment to place your money in is important.
Fortunately, we live in a world with information at our fingertips via the internet. There are countless media platforms, blogs and forums where you can investigate investment products and ideas. Furthermore, you will undoubtedly come across different companies and products naturally during your search. Again, you can always utilise the help of an independent financial adviser for guidance.
However you decide to make the most of your money, make sure to have financial goals set up. These will allow you to shape your investments going forward. Having an open mind and understanding that with financial gain can come loss and that fluctuations in return, are a normal part of the journey. As you learn and understand more and more about the investment market, you will be able to diversify your investments with an aim to grow your capital further.