Many persons today are trying to improve the standard of living but find that it is difficult to save. Being money wise seems to be a mere aspiration and knowledge of how to make better decisions about our income fail to prove beneficial when our overhead is more than our actual income. Despite this there is still the need to save or to make money work for us as many of us aspire to material things to be comfortable. One critical aspect of being money wise is investing your money. Investing simply means putting your money to work, so that it generates more money. You buy or sacrifice something today, with the intent of creating a stream of wealth in the future. There’s usually an element of risk attached, because the more money you’re prepared to take a gamble with, the better the returns will usually be.
However, before you take the plunge, there are a few things you will need to consider.
Investing is a risk, is it one you are prepared to take? If not, you might feel happier with the interest you get from a savings account. Don’t invest any money if you couldn’t live without it, or if it would change your life if you lost it. After all, if you starve yourself you probably won’t be around to reap the rewards of your investment.
Secondly, remember that investment is a long-term plan. If the stock market crashes, you might have to wait some time before you get your money back or make a profit. It’s not a quick fix, and to make any extra cash you should think bout not seeing your investment for a good six months minimum.
Ways to Invest
There are many ways to invest your money:
Stocks and Shares: By putting your money into shares, you’re giving companies your money to help them run their business. In return, if they are successful and their share price goes up, you will benefit from the rise in value. Equally, if the company’s value fails, you’ll be losing money. Right now, we’re in a very unstable corporate environment and many companies have lost value. Be careful investing unless you have received advice.
Unit Trusts and Investment Trusts: You can see with shares, putting your money into one company can be quite dangerous. To combat this, Trusts do three (3) important things:
• Firstly, they put your money into several companies at once. That way, you’re spreading your risk across the fortunes of many companies: some might lose money, but some will rise in value.
• Secondly, a Trust contains not just your money, but many other people’s too. You’re joining a whole bunch of people all committing their cash. Together you have more buying power to spread your risk across companies, and this larger pot of cash usually gets the Trust a better deal.
• Finally, a Fund Manager will look after your funds. It’s a Fund Manger’s job to spend time looking for the best place for your cash – day in day out – which means you need to know much less about the stock market than if you were investing privately.
Bonds: These are a particularly safe investment; in fact, you know exactly how much you’ll get back before you even buy them. Bonds are a loan from you to somebody else (usually the government), for a set length of time, usually between three (3) months and five (5) years. But because there’s no risk, they don’t pay back particularly well.
Property: Buying and selling property can be very lucrative, especially as in many areas property prices have raised dramatically. You will need a lot of money to start with, and if the value of your property falls, you stand to lose a serious amount of money.
Other Goods: There’s a market for most things people want – antiques and collectibles, land, fine wine, etc. But you must understand that buying goods as an investment isn’t the same as picking up a bargain and selling on at a profit. Bargains are rare, and usually rely on the seller being stupid. The value in investing is picking goods to buy that appreciate in value, because demand for them grows over time.
Don’t jump into investment without getting good advice from someone who knows his or her stuff. Get help if you need it. The “do-it-yourself” approach may not be suitable for everyone. If you try it and it’s not working, or you’re afraid to try it at all, then you should seek professional assistance.
Your first port of call is an Independent Financial Advisor
They are qualified to give you entirely impartial advice about your finances, and recommend a course of action.
Arm Yourself with Knowledge
Always do your homework. Understand financial matters and those that could affect you. Understand your current investments and the risks associated with them. Be cautious when evaluating the advice of anyone with a vested interest.
If you’re going to invest in stocks, research companies until you understand them. Remember investment does involve some amount of risk, so choose carefully and make sure you have done your research.