Whatever your life goals are, you probably require money to fund them, and investing is an excellent way to do just that. But not everybody is a pro when it comes to investment, so you require a guide to start investing if you are a beginner. Whether you want a new home, a car, or a dream holiday, this guide to investing across sectors can help you fund your dreams.
What is investing?
Investing is, in its simplest form, buying something which you can sell for more money down the line.
What isn’t investing? One thing it certainly isn’t is putting your money in a savings account. While this can be useful, you can’t grow money beyond the small amount your bank will pay in interest.
Investing also isn’t just gambling, because in the case of gambling, if you make the wrong bet, you’ll lose all of your money. While you may experience losses when investing, you’re less likely to lose the lot.
Here are some reasons why you should invest:
At the core of this guide to start investing, is the fact that it is not possible to simply build up cash from your savings account.
This is because the cost of living continues to rise and so buying the same amount of anything is becoming more expensive over time. The low interest rates offered by banks and building societies are usually not enough to beat inflation, therefore your money becomes less valuable as it sits in the bank. Investing offers an alternative that can build your wealth.
Guide to start investing – Where should you invest?
Shares
A share is a piece of ownership in a company, so when you buy a share in a company you own a part of that company. This means, when it performs well, you benefit too. The reward will be in any form such as the value of your share may rise, but it could also be in the form of regular payments which the company pays to its shareholders, known as dividends. The 100 top shares in the UK are listed on an index which is known as the FTSE 100.
Advantages and disadvantages of buying shares on your own
Buying shares on your own gives you more freedom.
You control where your money goes, and you can pick the precise company you want to invest your money into.
In case the company is successful the rewards can be substantial in terms of share price increases and dividend payments
Disadvantages of buying shares on your own
As you are picking the shares on your own, you have to make a call on the future growth prospects of companies
In case you invest in stocks with a company that performs badly, you could lose your money
Funds
To start investing, you can invest your money into a fund, which is effectively a group of shares in place of choosing shares on your own.
The advantages and disadvantages of investing in funds
Advantages of investing in funds
A manager uses their knowledge and expertise to decide which shares and other assets to buy and sell on behalf of the retail investor.
There are many types of investments that come under funds. This makes investing in funds relatively less risky compared with investing in individual shares. Apart from this, you could be able to invest in unusual assets like gold or oil, which have historically proved to be useful investments.
Disadvantages of investing in funds
Fund managers charge a fee in return for the services they offer to retail investors.
The most important thing a guide to start investing can teach you, is that investing comes with inherent risks, and in this case, the overall value of the investment can fall despite having a range of assets to balance risk
Property
House prices usually rise over time, so as a guide to start investing, property could be a smart place to put your money. Investment in property involves a wide range of assets, so there are a number of options to chose from. You might invest across property assets which may include a house or flat that you let to tenants, or you can own shares in a property company that, in turn, invests in property. These property investments can range across assets such as warehouses and shopping centres.
Guide to start investing – Advantages of investing your money in property
As a guide to start investing, property may provide a regular source of income from monthly rental payments from tenants. Apart from this, the value of property usually rises over time, which means there is growth in the value of the property and you can encash the value of the property sometime down the line. Usually, the more you wait, the more the value of the property rises. Any guide to start investing should state that investing in property is a long term investment. Therefore, investing in property provides a dual source of income to you. On one hand, you earn rental income through the property while tenants stay at your property, on the other hand, the property continues to grow in value over time.
Moreover, if you buy in an up-and-coming location the property value could increase at an even faster rate. Though buying at such a location may cost you more, you could be in for a better value for your home. So, as a guide to start investing, you may initially opt for a property at a relatively cheaper price.
Disadvantages of investing your money in property
Purchasing an investment property can be expensive and time-consuming. Because of this, it could be better suited to the pros. If you are a beginner, any guide to start investing would suggest that you start by investing at a smaller scale at the beginning and then proceed to more specialised and expensive investments that require higher levels of skills and experience. In the beginning, you may need a guide to start investing in order to invest wisely.
Managing tenants can be a tricky matter and all tenants are not the same. You may come across somewhat difficult tenants which may prove to be a not-so-good experience. In some cases, disputes with tenants may turn particularly bad, requiring legal action. This may cost you money and time, undermining your investment. Finally, selling a property takes time and this may have an adverse effect on your finances, in case you need money urgently.