If you are lucky enough to have a large sum of money sitting around, don’t just leave it in your bank account, you can grow it by using it for investment.
Investing money can help you to increase your funds and reach your financial goals. However, it is important to be savvy about it. Otherwise, you could end up losing your money.
If you choose to invest your money, you will encounter a risk/return payoff. What this means is that the greater risk you take with your money, ideally, the greater the growth potential. However, this is not always how it works out – bigger risks can lead to an increased chance of losing your money.
To ensure you keep your money safe it is vital that you are savvy about what you are willing to invest and what risks you will take.
For our beginner’s guide to investing, have a read below:
What are your goals?
Think about what you want to achieve by investing and set clear goals. Do you simply want to grow your funds? Are you hoping to bring in a reliable income? Is there a certain amount you need to make?
Knowing what you want to achieve from investing will help you to choose the amount of risk you should take to reach your goals. As well as the best industries to invest in.
How much time do you have?
Once you have set yourself goals for your investments, work out the length of time you need to achieve them. By doing this, you will have a clearer idea of the return rates you will need and can look at how realistic your goals are.
If you have short-term goals, like less than a five-year period, it might be best to avoid investing. Instead, consider putting your money into a high-interest cash Isa. The reason for this is that if your investment falls and you lose money, you may not have enough time to recover your losses before you need to make your money back.
Whereas if you have longer-term goals – five years or over, you have enough time to invest. However, it is also a good idea to take note of your age and employment status. For example, if you have retired already your ability to earn money is nonexistent and so if you lose money, you have no way of building up your savings again.
How much can you invest?
Consider how much you can afford to invest – think about your debts, insurance, bills, and other savings. Make sure to leave yourself with enough cash to live on, don’t invest everything you have.
Keep in mind that investment is a long-term project, so you should avoid touching the money you have invested for at least five years.
What will you invest in?
One of the most difficult parts of becoming an investor is choosing what to invest in, especially with so many areas to choose from. You can invest in anything, from oil and gas and stocks to precious metals and pharmaceuticals.
Before investing in a sector, make sure to do your research properly. For instance, if you were considering investing in the precious metals industry you could have a look online at resources. Looking online would allow you to find out everything you need to know about gold investment.
Get some financial advice
Before making your investment, make sure to seek some financial advice. Unless you have substantial knowledge of the different industries and a good financial sense, you should not be managing your investments alone.