From an early age we’re all told that we should save money. When we’re very young, we’re told that money is best saved for ‘a rainy day,’ but as we get older, we begin to realize that our ‘rainy day’ savings are what eventually buys us a house or a car, or gets us through a difficult time when we have no income coming in. Having savings is great, but having savings that grow above and beyond the amount of cash you’ve paid into them is even better. How do you make that happen? By investing your savings, of course.
‘Investments’ is a big, scary word to a lot of people, but that’s only because the average person doesn’t know enough about the investment process. We see news about the stock market, prices going ‘boom,’ prices going ‘bust,’ and everything in between, but unless we’ve taken the time to learn about financial instruments or we know someone who specializes in them, we generally don’t know what they mean. Because of that, far too few of us are allowing our money to sit in an account that barely attracts interest and grows slowly. That’s a shame. We all deserve better than that!
We can’t give you a full understanding of the various kinds of investment in a single article, and that’s not the purpose of this page. Instead, we want to give you a brief overview of what different types of investments do. That way, when you go to speak to an investment professional about the best way to make your savings work for you, you’ll be armed with a little knowledge!
Stocks
Playing the stock market is probably the fastest way to ‘get rich quick’ in terms of investments. Sadly, it’s also the quickest way to lose your money. While professionals hate to admit it, there isn’t much difference between trying to play the stock market and trying to play online slots. While there are admittedly a few people who’ve played at slots site and won big immediately, most players have to endure a few losses before they get anything back out of the game, and not everyone has the capital to withstand losses for long. A professional can give you a better knowledge of the likely performance of stocks than an online slots player has of what might come next, but there are still huge risks. When you buy a stock, you’re essentially buying a stake in the performance of a business. When the company does well, you make money. When it doesn’t, you lose it. It’s possible to accumulate money rapidly this way, but having a high tolerance to risk helps.
Pension Funds
Pension funds are often misunderstood as things that only older people have to worry about. More should be done at school to change that perception. Pensions work the same way as any savings scheme and can be paid into from the moment you start working. If you pay enough into yours, you might even be able to take early retirement and enjoy receiving a comfortable income for the rest of your life. Your employer should provide you with a workplace pension, but that doesn’t mean that you can’t also open up a private pension and start paying into it at the same time. You might even be able to withdraw lump sums from it further down the line.
Commodities
When you buy a stock or pay into a pension fund, you’re not physically buying anything. There’s no physical asset you’re buying. Investing in commodities is the opposite of that process. When you invest in a commodity, you’re buying something real. Generally speaking, physical assets depreciate in value over time. You might, therefore, wonder why anyone would invest in commodities, but there are lots of great reasons so long as you can work out what’s a solid long-term bet and what isn’t. Investing in cars generally isn’t a smart move unless they’re collectible classics, but investing in gold and silver usually results in healthy profits over a period of many years. Investing in property is often a smart bet, too – although you have to beware of recessions and political changes that might devalue your commodity portfolio.
Bonds
Bonds, like stock purchases, are investments made in businesses or entities. When you buy a bond, you’re basically providing a loan to whomever you’re investing in. They agree to return your full investment to you at a specified date in the future, along with a contractually guaranteed amount of interest on top of your initial fund. There’s an element of risk when you’re doing this with a private business because the business could fail, but less risk when you’re doing it with the government. Government and treasury bonds almost never default, and so you can rest assured that your money is coming back to you. The downside is that the rate of return is often relatively low. You’ll make some money this way, but you won’t necessarily make a fortune.
Annuities
Like investing in a bond, investing in an annuity plan provides you with contractual guarantees. The chief difference is that you’re not entering into this contract with a business or a government. You’re doing it with an insurance provider instead. You purchase the annuity, and in return, you receive payments from the insurer for a specified term. This might be a single lump-sum payment when you retire, or it might be regular payments for the rest of your life. The amount you receive back should always be more than it cost you to acquire the annuity. Annuities are generally seen as a safe way of investing money and earning a little on top, but again, the rate of return is usually quite low.
As you can see, there are several routes you could choose to take with investments – and there are even more we haven’t covered! From the limited information we’ve provided above, we hope we’ve been able to give you a feeling as to which investment routes would or would not suit your purposes. The next step is to contact a qualified professional to discuss your options, so find a reputable one close to you and book an appointment. We hope your investments prosper!
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