Investing for the first time: investments for beginners
There are more ways to invest your cash than keeping it in a bank account to earn interest, but investments can seem daunting for beginners.
Here is a simple guide on investing to give investment beginners a better understanding.
The different types of investments
An investment is something you spend your money on in the hope that it will eventually give you a profit. There are a few types of investment, though it is often a good idea for your portfolio to consist of a mixture.
- Stocks or shares: Buying shares in a company gives you ownership of part of the business and allows you to receive a percentage of its profits. This is what most people think of when talking about investments.
- Property: Property can be an investment if you sell a property for more than you bought it for, earning a profit. It can also earn you a regular income by letting it.
- Bonds: A bond is when you lend money to a company or government for a defined period, earning you interest on the loan.
- Cash: Any cash savings you put into a bank account are also considered as investments since you earn interest on it.
- Collectibles: If you buy art, antiques, or other collectibles with the intention to resell them for profit, they can be considered as an investment.
Returns – making a profit
A return is the reason you make investments in the first place. It is the profit you make on an investment. It will be paid differently depending on the type of investment; returns from shares will be paid in the form of dividends, rent will be taken from any properties let out and interest will be paid on bonds and cash savings in bank accounts.
There will always be risks associated with investments
If any financial advisor ever tells you that an investment is completely risk-free, you should walk away and ignore their advice.
All investments come with some risk involved, the level of which depending on the type. A good financial adviser will walk you through any risks associated with a particular investment, and advise you how to invest your money depending on how risk adverse you are and how much you want to invest.
Diversifying your investment portfolio to reduce risks
One of the most common and most effective ways to reduce risk in investing is to diversify your portfolio, which means investing in multiple products and types of investments.
The best way for beginners to make successful investments
The best way for beginners to make successful investments beginners is by getting help from a financial adviser such as Oracle Consultants. Oracle will find out your needs and then help you achieve your investment goals.