When is the right time to start investing? You may think you are too young to worry about investing or you just can’t be bothered to deal with the hassle. Investing is a quick and easy way to look out for yourself in the future. If you have a pot of cash lying around then why not invest, making money from your money is the smartest way to get a profit. Read our helpful guide to see which investment opportunities might suit you.
So how much should I invest?
You don’t need to be swimming in money to invest, by drip-feeding small sums into investment opportunities you can still make a huge profit. Never invest money that you might need to rely on to live, that is just setting yourself up for disaster. It is always wise to not invest more than you can afford to lose. This is to protect yourself from unforeseen circumstances such as a stock market crash (Thanks COVID). By drip-feeding your money you want to save, for example once a month, for a long period, ideally more than 2 years, you have enough time to ride out any bumps in the market that might see you losing your investment. It is best to invest as soon as you can as your money compounds, whether that be by interest rates or else, the earlier you invest the greater return you’ll get.
So what can I invest in?
Savings Bank Account
Savings accounts are often just as easy to access and use as regular bank accounts, and they usually have a higher rate of interest. Considering the current climate and low interest rates of recent years a savings account is not a get rich quick scheme, it’s far from it. The best thing is to research different bank accounts to see who offers the highest rate of interest. So while you can benefit from free and easy access to your money you can earn a little appreciation on the side.
In the UK you are given a personal allowance of £20,000 tax free savings held in ISA’s. Individual Savings Accounts are one of the most popular ways to invest, especially due to the government’s support. There are loads of different types including stocks & shares ISA’s, cash ISA’s and lifetime ISA’s (a recent replacement of the old government help-to-buy scheme). This is a fantastic way to save up for your first property, especially as the government contributes towards your future home! Each ISA is slightly suited to different people or investment needs so make sure you do your research. ISA’s are fundamentally a way to invest long-term tax free. However, there are a few drawbacks… the cash benefits are not as high as some of the more risky strategies and you can’t access your money for a fixed period of time. So if you looking to risk your investment to make a huge profit or will need to access your money ISA’s may not be for you.
Mutual funds are a way of buying shares indirectly, where a Fund Manager uses their expertise to invest on your behalf. This way there is less risk compared to investing in the stock market as it doesn’t require research or experience to know which investments will pay off. It also spreads the risk over a number of individual investments to ensure you make a return. However, with less risk brings a lower return than direct investment due to commission for the Fund Manager and certain risk control measures that are required.
Stocks are direct shares in companies and other asset classes. There are thousands of different types of stocks available on the market so you can choose the best companies to invest long-term to gain a profit. Investing in stock can provide profits way above bank accounts, but there is a lot of risk involved. You can gain profit by buying shares for a period of time and selling them when they are worth more. Although sometimes stocks won’t appreciate like you’d hope due to market volatility or other reasons, hence why stocks and shares are a high risk investment. It is important to remember they pay out dividends too, a small thank you present of cash that companies give out if they are succeeding which is a great little bonus. To invest in stocks and shares you must use a broker, to choose the best see our recommendations here. With the stock volatility brought by COVID-19, stocks have become increasingly appealing to the public. Market research done by eToro found a 66% increase in interest this summer compared to last summer. Will you hop on the bandwagon to start your investment journey?
Read through the options out there? Diversifying your investments is a great way to protect yourself from risk and ensure a profit. For info and learning tips on how to invest, follow bullbear.io.