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Investing can be challenging when providing young, humble and indebted student debts. We spoke with stock market expert Rodney Hobson, who talked about how to invest even if you don’t have a lot of money!
Investments involve cash deposit grow in “real terms” – that is, your money accumulates faster than inflation (rising costs of goods and services). That means you end up better than before.
While investing has a reputation for being risky, good investment, discussion of gambling – consumption of the difference between financial planning and rapid enrichment schemes. The greater the potential for short-term rewards, the greater the risk of losing the investment.
Eventually, a 100-1 hostility horse will be of great benefit if he wins, but it is more likely that the bookmaker will drop your stake and hold it back.
So to separate fact from fiction, here financial journalist Rodney Hobson A – Z on how to invest your money.
The best ways to invest money
So what basics should you remember?
It is important to consider the total return you will get from your investment. Some types offer you a profit, others a capital gain (return on investment) – either ideally both.
And don’t forget that there are usually costs to maintain a certain investment, be it a broker’s fee, maintenance and storage. Then there is taxes to pay and inflation to account for before realizing your real income …
However, here are the best ways to invest your money:
Put the cash in the bank
It seems a safer option because you know exactly what you have, but cash makes a big investment – especially given the deplorably low interest rates paid by banks and construction companies. Interest rates are rarely higher than inflation, which means your money is actually losing value.
If you have zero risk exposure or you are planning a longer-term plan, be sure to put it in a savings account (choose without ISA taxes) get some interest. Fixing for three to five years will give you the highest interest rates, but keep in mind that you can access it over a period, plus you can lose if interest rates improve.
Whatever you do, just keep cash under the mattress. Thanks to inflation, which loses you the most money out there – and if you are robbed you can lose a lot!
Invest in antiques, art, wine and collectibles
Collecting can be very cheap, so they are an affordable form of investment for those with limited resources and you can learn how to move on. But if you think it’s an easy path to wealth, maybe you’ve watched too much Available in the attic.
Investing in collectibles does not bring direct profit, and depends on who pays you more than the goods that cost you. There is also an additional view that fashion is coming and going, so what is most desirable today may become a pass next year.
You need to be an expert in what exactly you are collecting, otherwise take on a run of those who know what you are doing. Buying and selling online usually cheaper than using old-fashioned auction houses and offers you a much wider global market.
A good starting strategy is to get the desired things in which there are few target buyers (e.g. Gumtree website ads or selling car boots) and selling them where demand is highest eBay giant’s online auction or club).
Beware of falling in love with the items you collect – it turns exercise into an expensive hobby, not an investment!
Put money in the property
The best single investment for most people and the one you should make as soon as your income allows is buying your own home.
Historically, the cost of housing rises faster than inflation, and one day you will destroy the mortgage. Rental rates increase from year to year and you always need somewhere to live.
Once on the real estate ladder, you will be able to climb to more expensive properties as your income improves. As an investor, you can go a step further by buying and giving, owning real estate that generates income as well as increases value.
The big disadvantages are that you need to invest a lot of money in each investment and this can take a long time to keep track of the property and tenants. Make sure you set aside some money to cover hefty maintenance bills (which may or may not be allowed to you!).
Look in the bonds
Governments and companies borrow money and issue deals. Issued by the UK government known as gilding because the certificates had gold leaves on the edges to convince investors how safe they were. You can acquire gilding (directly or as part of the fund) as well as shares through a broker.
They have a guaranteed interest rate and are usually the date when they will be redeemed and the borrower redeems them at the full price known as face value or face value.
The yield on bonds (the amount of interest you receive each year for each £ 100 investment) will reflect how safe or risky the investment is perceived by investors. The safer the debt (the less likely the borrower is to recover its debts), the lower the return.
Bonds issued by governments are known as government debt and are generally considered safer than company debt because governments are less likely to collapse than companies (however, keep in mind that Argentina defaults on its debts back in 2005, and Greece is fighting for its recent fulfillment of its obligations).
The opposite urgent savings accountsyou can sell your bonds at any time – but the difficulty with bonds is that you don’t have to pay 100p per pound to buy them. They trade at market value – the price investors are willing to pay.
In times of low interest rates the value of bonds will rise, which helps to reduce the annual amount you get for every £ 100 invested. As interest rates rise, the market value of bonds falls.
Stocks, stocks and stocks
Stocks, stocks, stocks: different names, same thing. Americans tend to refer to stocks while we in the UK talk stocks. They represent a share in the campaign, an equal share in ownership and voting rights with one vote per share.
Shareholders also sometimes get caught dividends (payout from profits) is usually twice a year, although several large companies pay four times.
Like real estate acquisitions, stocks create the potential to increase the amount of investment as well as profits because the shares of companies that grow, increase and provide an increase in dividends. But with stocks you can invest much smaller amounts at the same time and keep it much cheaper.
If you are nervous and anxious, you have a lot of funds, you can put your money into a fund like a fund contribution or an investment trust that combines your money with other investors ’money to invest in your stocks. You have a manager who makes investments for you, and it relieves anxiety.
If you have to invest in gold
Ash has been noted by almost all civilized societies in recorded history – but to call it a safe haven, as the press does, is an exaggeration. It actually fell in price over 20 years between 1980 and 2000, and the price has fluctuated greatly over the past few years.
Gold earns nothing – indeed, it can cost money and save it. Also, you are totally dependent on someone else to buy you a higher price than you paid. Because gold is valued in US dollars per ounce, you also need to track exchange rate changes if you want to invest in it.
So, keep track of the types of investments that bring you immediate benefits (such as where to live) or that depend on other people’s trends or tastes.
My last recommendation is: if you can, use your ISA annual assistance to protect your cash and capital investment from the taxman. On April 5th every year the unused ISA help for the previous 12 months disappears – use it as much as possible!
About the author
Rodney Hobson is a financial writer, columnist and broadcaster who has covered financial markets in the UK and Asia. A guide to its novice stock market The promotions are done simplyand other investment books published by Harriman House.
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