You want to invest and have your money ready to get to work, but you just don’t know where it should go. There are a number of options to which you can begin investing your money. Whilst the focus of The Regular Investor will be around the stock market, we have identified a number of possible ways that you can invest, whether it is your first time or you’re looking for something different.
If you have ever wanted to be involved with a business or even own part of one, then the stock market may be the perfect place for you to invest. The stock market allows investors to buy securities, or shares, funds and bonds amongst other things.
Within the stock markets there are hundreds of companies which you can invest in. The stock market offers something for everyone, from low to high risk/reward investments. Investing in the stock market can be a great long-term investing method, allowing you to grow your wealth as companies grow.
· Stocks and Shares
Investing in stocks and shares allow you to own a small piece of an individual company. As you invest your money into a company, you become a shareholder. This entitles you to a share of the profits; either in the form of dividends or growth in share price.
The share price may increase or decrease depending on company performance. Assuming the company grows, you could be able to sell your shares for more than you bought them for in the future.
There are hundreds of publicly listed companies to buy shares in, from small local businesses to global brands. Shares tend to have a higher associated risk than cash or bonds, but of course tend to lead to higher returns. It all depends on the business and how they perform. Investing in individual stocks is all about risk/reward, so it is important to consider if the business is right for you to invest in.
However, you may not be completely sure about which individual shares to invest in. Fortunately, there is still an option to be involved in the stock market. You can invest in funds as an alternative to buying shares in a specific company. A fund is a collection of investments allowing you to hold a number of companies within one area.
There are a number of type of funds such as mutual/index funds and exchange traded funds (ETFs). Depending on the fund they can be passive and follow a certain market or companies. Alternatively, they could be actively managed in which case someone would invest on your behalf, choosing the stocks within the fund. Funds allow you to own numerous businesses, which could be specific to a certain market, industry or stock exchange.
Similar to buying individual shares, funds can increase or decrease. As part of the fund, you are entitled to any gains. This could be in the form of dividends, or they could be reinvested to grow your invested amount. Funds tend to be lower risk than individual securities as they are diversified, but it’s possible they will have lower return.
If you are looking to avoid the stock market, then there are other opportunities to invest depending on your level of risk, knowledge and general outlook on investing. Stock market investing is certainly not for everyone so it could be important that you consider what else you could invest in. Below are some alternatives you may wish to consider:
Bonds are fixed income instruments, issued by governments and companies in order to raise capital. They are essentially debt created in order for institutions to borrow money from the investor. Upon buying a bond, you are entitled to the future debt repayment, with added interest.
Returns are dependent on the time and risk of the bond. However, the bond market has low volatility and thus tend to offer typically low returns in comparison to the stock market. Bonds can be seen as low risk and could be ideal for those looking to keep their money within a so called ‘safer investment’.
Investing in property means buying a house, apartment or building, and using it to make money on. For this you may choose to rent out the property, in which case you would receive a yearly yield. Otherwise, you could sell for a profit in future as property tends to at least hold its value, if not increases in value further down the line.
Whist investing in property may not be as lucrative as it once was, renting allows you to receive consistent returns. Investing in property tends to give similar returns to the stock market. However, owning a property allows you to own a high value asset which increases your net worth and gives you leverage for other financial endeavours, which you can use for further monetary gains.
· Peer to Peer (P2P) Lending
Peer to peer lending allows investors to lend directly to individuals or businesses through an online platform. P2P lending cuts out the middleman, meaning there is no need for banks or brokers. Investors are able to choose who they lend money to and how much they will fund.
Money borrowed is paid back with interest, thus allowing investors to make a return. The amount of interest paid back will depend on the risk of the investment, and the amount borrowed. There is the possibility that those who borrowed could default the loan and you could lose your investment. However, investing in P2P lending tends to be low risk low reward. It could be an ideal investment if you wish to help others whilst aiming to grow your capital.
A very recent phenomenon, cryptocurrencies are an alternate form of currency. They act just like ordinary money but exist within a digital format. They have no central bank or authority controlling their supply.
Crypto works like the stock market in a sense, where the currency you choose to buy may grow in price but could also lose its value. Investing in cryptocurrencies can be considered high risk, as they are relatively new and not much is known about what effect they could truly have. They are extremely volatile but have rewarded early investors with high returns.
Cryptocurrency could be the money of tomorrow, so investing in them could be for you if you believe they could become mainstream.
· Your own business
If you have a particular set of skills, then you may want to consider starting your own company. You may decide that you want to be more active within your investment, and ensure you are working to make your money grow. Whilst starting up on your own requires a lot of time and effort, it can be extremely rewarding if you are able to transform it into a successful venture which turns a profit.
You may not have even considered yourself directly when it comes to investing. Perhaps it wasn’t something you were expecting but investing in yourself could pay more than you realise. Upgrading on your career, learning a new skill or simply improving in a personal and professional manner could lead to greater financial reward in the future.
As you can see there are a number of areas to which you could invest. Stock market investing is the typical place to invest in, allowing you to own part of an individual company, or even to own part of many. The stock market tends to offer solid returns and allow investors the opportunity to grow their money.
Additionally, there are other places to put your money, depending on the type of investments you’re looking for – from low risk to high volatility. There are options for you to be active in investments, or simply remain passive and watch your money grow from afar. Whatever you decide, there is something for everyone, and plenty of choices for what you can invest in.