Investing money can be a tricky business, especially if you’ve never done it before. There are lots of ways you can invest your money but not all will be safe. For example, you couldn’t reasonably expect a large return if you choose to spend your money on gambling. Yes, you may have some fun at the casino but it’s more likely that you’ll leave with less money than you started with. So, if you want to invest your money wisely, where do you start?
What is an Investment?
An investment is something you put your money into or buy, with the expectation of making a profit. The general point is to make money on your investment so it’s not just sitting somewhere doing nothing. There are many different types of investments, which means there are many different types of returns. The hard part is choosing the right one for you. You also need to be aware of any services fees you may be charged on your investment or returns. For example, will you have to pay tax? If so, you need to think about whether it’s worth making that particular investment. So, what kind of investments are most popular?
As with most other investments, property can be a risk. You have to keep your eye on the market and ensure you buy and sell at the most opportune times. Being a landlord can come with its own set of problems. As long as you provide the appropriate contracts and get them signed by each of your tenants you will be covered for any eventuality. However, you may come across the odd tenant who makes things awkward for you. All in all, becoming a landlord can be highly profitable and if you’re handy at DIY or have people you trust in building, plumbing and electrical careers, it could be the perfect investment for you.
Stocks and Shares ISA
The benefit of a stocks and shares ISA is that you don’t have to pay any tax. You can invest up to £15,240 per year and any gains from stocks and shares that are added to that aren’t taxed either. You’re also allowed to transfer your stocks and shares to another provider without it affecting your yearly allowance. This type of investment is great if you’re not relying on it for an income. You’ll get much more out of it if you’re able to leave the money where it is long-term. You don’t have the same amount of flexibility as a cash ISA so if you’re going to invest in this option, you may have to be more patient than other options.
Opening a cash ISA is a relatively simple and safe option. You have the same type of allowance as the stocks and shares ISA and some Cash ISA’s have a fixed interest rate. It really depends on what you want from your ISA and how quickly you need access to your cash when you need it. Some ISA’s allow you instant access to your cash, some require a 30 day notice before you can access it and the fixed rate ISA’s usually have your cash locked away for up to 5 years. It may be an idea to compare the different ISA’s and find out what’s best for you.
It may be an option you haven’t heard of before but with all of the uncertainty going on in the world at the moment, it’s certainly a valid option. Bitcoin is a type of digital currency. The currency is held electronically which means your money isn’t controlled by your bank. It’s a fantastic solution for growing business that trade largely online. Obviously it means you can only buy online but the majority of us are doing that anyway. The whole process of currency in places like Minting Coins is based on mathematics. You can find out more about Bitcoin here. You may not see a return on investment with Bitcoin but it could very well be the future of currency.
Have you ever been told by a sales person that what you’re buying is an investment? Sometimes that’s a sales tactic, but sometimes they’re right. You may want to use your money to invest in precious items like jewellery, art or collectables. They’re items that can be passed down to future generations as heir looms and more often than not, they increase in value over the years. It could be something that your great grandchild could cash in so they have the money to buy a home.
Building a Business
There are many people who have a business idea but don’t have the time or money to implement it. If you have a business idea that you want to run with, investing your money in the business could potentially see a large return. Of course, this is risky. Before you decide to invest part or all of your money, it’s best to draw up a business plan and let an advisor take a look. Gather some feedback from family and friends to see whether they think your idea will work. Lastly, you need to think about if there’s a gap in the market for it. If you’re planning on opening a hair salon in a town with 10 existing hair salons, you may not make your money back.
Invest in Someone Else’s Business
Also known as Venture Capital. Perhaps you have a friend or family member that is building up a business and you feel they’re onto something. If you’re passionate about what they’re trying to do, you may want to offer to invest. If you do come to this decision, you need to sit down with the business owner and discuss how the money will be spent. You also need to agree on an interest amount. This may be an awkward conversation if you’re close to the person but you need to know your money is protected. There are always times when the idea is good but it isn’t successful because of human error.
Use an Investment Company
It’s basically the same as investing in stocks and bonds, except it’s more convenient. An investment company will choose a suitable investment, based on your requirements and monitor its progress. This means the stress of monitoring your money is out of your hands. You will have to pay a fee for their services but it’s usually worth it if you’re inexperienced when it comes to investing.
As opposed to being a landlord, you may want to consider investing in a holiday home. A nice cottage with miles of fresh air and green grass, or an apartment right on the beach. We all need to get away from time to time and this is the perfect solution. Of course, if you want to rent out the property while you’re not there, you will make enough rent to cover payments but holiday homes can bring in quite a significant amount when they’re sold at the right times. It’s also profitable to buy houses abroad that need to be worked on. Getting local opinion on hiring labourers will help you to get a job well done. It’s likely that you’ll sell the property on to other holiday makers and you’ll make much more than you invested. Home improvement is a big money maker if you have the time and patience for it.
There are many more options when it comes to investment but it’s important to remember that all of them come with their own risks. Before you start investing, take some time to figure out what you want from it. Do you need the money to make a profit quickly? Will you be relying on the money to survive? Are you able to leave the money for a few years to get the best return? There are a lot of things to consider before diving head first. Investing is a huge learning curve and unfortunately, interest amounts and safety levels can change as quickly as you blink.
Here are some words you may come across to give you a head start:
- Portfolio – You may come across this sooner rather than later and the word can seem daunting when you’re just starting out. Don’t fear – any investments you already have will make up your portfolio.
- Assets – Your assets are things you already own that could increase in value. For example, your home, art collections, jewellery etc.
- Holdings – These are any of your valuable assets that you’ve included in your portfolio.
- Asset classes – These are assets that are similar in nature. They may include, cash, stocks or bonds.
It can seem like a bit of a minefield when you want to invest for the first time but you may find yourself strangely excited too. Investing can become addictive but as long as you have you and your families best interests at heart, enjoy away. Top Tip: Whatever your friends may have told you, your favourite football team is not a guaranteed bet. Keep your money!