Investing is a way to set aside money and make that money work for you while you are busy living so that you can fully reap the rewards of your work in the future. Investing is a means to achieving a happier ending.
The purpose of investing is to use your funds in one or more types of investment vehicles with the hope of increasing your funds over time.
Reasons to start investing
Well, but you must be wondering: why should I start investing my money? See the best investment tips for beginners now. We separate this for 3 reasons:
- Saving money is not enough
Buying the same amount of stuff will get more expensive in the long run. The low interest rates offered by banks and construction companies are not enough to overcome inflation, which currently stands at 5.1%. The current average interest rate for easily accessible accounts at all banks is 0.19%.
- Your money can really multiply in the long run
Let’s say you’ve invested £10,000 over five years, and your neighbor has saved the same amount in a savings account. If the interest rate on savings was 1%, the neighbor’s pot would be worth £10,510 after five years.
- The power of compound interest
The more you invest to grow, the better. You have your original investment plus the return you make each year, which in turn will earn interest.
How to start the best investment tips for beginners?
What should I do before starting? Well, first, before you buy a stock or fund, it’s best to:
Pay off any expensive debts like credit cards or overdrafts with high interest rates. Otherwise, interest payments will offset any investment gains. Read more about paying off debt or saving up here.
Make sure you have a “rainy day” fund with three to six months of income. This money is for emergencies like your boiler failure. If you’re still worried about investing, it’s important to remember that nothing is risk-free when it comes to your money.
Where to start investing your money?
Many people are convinced that you only invest in what you understand. So if you decide to buy stock in a company, make sure it’s one you know and even use. And what are the best investment tips for beginners?
Stocks are a small part of a company. When you buy stock, you get a piece of the company, so when it does well, so do you.
In this type of investment, you lend money to a company or country. You will receive a fixed amount at the end of the bond’s “significant” period, along with periodic interest payments called coupons.
Instead of picking your own individual stocks, you can put your money in mutual funds. This is actually a group of stocks, although managers can invest in other types of assets such as bonds.
We’ve all seen how house prices are going up, so it’s no surprise that people invest in real estate. While most people think of investing in residential real estate, you can also invest in commercial real estate like warehouses and malls.
You can also invest small amounts of money in other types of assets, such as precious metals like gold and silver. Investing in precious metals helps diversify your portfolio and tends not to correct against the stock market. In other words, if the stock market goes down, you might find the price of gold going up as people flock to this “safe haven” asset to store their money. You can invest in precious metals by buying investment funds that specialize in this sector.
Now that you know the best investment tips for beginners, what do you think about starting to invest this money, being able to live only on income for the next few years?