If we want to build a decent future in later life its clear simple savings and bank accounts are not the answer. Fluctuating rates of not so great interest won’t help us fulfil our dreams or ensure we have something to fall back on. So for those of us fortunate enough to be able to save we need to enter the world of investing. The financial world away from the vast array of technical terms and financial language isn’t actually as complicated as we think.
So What Kind of Investment are Available
There are investments to suit everyone. You may just be happy to place your savings into one commodity or several. Here are the three best examples for newbie’s carrying the least risk:
This product is one of the safest to invest in and just about risk free if the bonds are purchased from a settled Government. When you buy a bond you are simply lending your money to either a firm or a Government, who pay interest on the money. Eventually you’ll get your money plus the interest back. These are categorised under ‘Fixed Income securities’. The flip side is because the risk is minimal, then the returns are also minimal. They are in fact are good place for the Investment beginner.
Buying a stock gives you a little piece of a company and means you can attend shareholder meetings and vote. These equities will bring you a share of any company profits or ‘Dividends’. In this case however fluctuations are likely and there’s no guarantee you’ll make money out of this. Some stocks don’t pay dividends either. But this is the worst case scenario and of course they can also give you a very high return in certain cases.
When we put a mixture of stocks and bonds together and you buy them in a package this is known as a mutual fund. These can include stocks in various industries, Government bonds, company bonds, etc. They either be largely American or from other countries around the world. The fact is you are putting your own money together with a number of other investors. You pay a fund manager to select various securities and with a specific aim. The concept is you’ll get a better return if a professional does this for you. It also means you can invest and then let someone else get on with managing it for you. Stocks and bonds are also known as equity and debt.
You should consider all three of these very carefully but of course there are other slightly more complex investments and we can touch on those briefly. These are really for the more experience investor or for someone who wishes to delve much further and invest much more money!
You have the right to buy a stock for example for a set price on a pre-organised date. This carries no obligation though. But you need to fully understand their complexities and the risk before using them.
You can learn how to trade the forex market and there’s a wealth of information over the internet. Again this can be done in various ways so you need to know what you’re doing.
This of course is playing the property market which means taking more risks with your money. If done well the returns can be high but as with any market there are fluctuations.
Another market with possibilities but you need to know what you’re doing. Again, get it right and the rewards can be pleasing. Professional help is required though.
These involve signing a contract with another party to buy or sell a chosen asset at an agreed price. The delivery of this will be on an agreed date and time. Futures exchanges act as a go between involving both parties. Once more futures can carry complexities and it’s best to get the best professional advice before going down this road.
There are various other areas you can get into but you shouldn’t need to worry about such things at the beginning of your investing career. Getting into complex areas immediately will almost certainly get the investor into trouble. The professionals themselves advise on creating a solid foundation with the help of an investment advisor early on. With all of these things it’s essential to carry out plenty of research. An investor needs to feel comfortable in what he or she is doing.
We have discussed portfolios in another article so as not to bombard you with too much information in one go!