Beginners Guide To Financial Investments
25 February, 2017
How do you make your money go further? No matter how modest your funds, you can look to maximise what you get from them by investing money. Yet many of us are nervous about making investments and are worried about being caught out and losing our hard earned cash.
Luckily, help is at hand. Check out our beginner’s guide and get up to speed on some of the key things you need to know to make a success from your investments.
Types of investment
First of all, you need to think about what type of investment you’d be most comfortable with. There are, as this article notes, four main asset classes to consider – shares, cash (the savings you hold in a bank), property, and securities (bonds). On top of that you can also invest in foreign currency (forex trading), commodities (things such as oil or gold), contracts for difference (based on shares gaining or losing value) or collectibles (antiques or art, for example).
Investors value something called ‘diversification’ – which means building a portfolio of several of the different types of investments outlined above. It makes sense to have a diverse portfolio, as that then you are less reliant on the success of one particular investment.
Learn the lingo
The world of financial investments is full of terminology that you need to get up to speed with. Time spent doing this will serve you well in the long term. It’s vital to know your FTSE 100 from your Germany Dax 30 and your CFDs from your DFBs.
Entering into an investment with knowledge of the words and terminology in your chosen sector will reduce your risk. In fact, it is an essential part of the research that every investor needs to conduct in order to make smart choices.
Speaking of risk, this is something that you need to appreciate. Every investment carries a risk – whether it’s the price of your stocks and shares falling, or the value of your house dropping. Values can go up and down all the time, so it’s not something you should be afraid of.
Every investment should be weighed up based on the potential gains and losses so that you’re aware of the possible spread of outcomes.
Direct or indirect investment
You can also look to make a direct or indirect investment. Direct investments involve you buying an asset – such as taking shares in a company or buying a property – yourself. Indirect investments involve you putting your money into a trust fund instead. These are bodies that will take money from investors, pool it together and then invest it into an asset on your behalf. They will take a cut of the proceeds, and you might decide that their expertise and the rewards they secure more than makes up for this. Some funds and trusts specialise in certain parts of the market – such as property – whereas others are set up to make ethical or green investment choices.
There’s much more to learn, but these are four fundamental factors. By understanding which assets you are interested in, the ways in which to put your money into those assets, the terminology of the market and are wise to the risks you face, you’ll be more confident as a beginner.