Investing a beginners guide
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They say the harder you work, the more money you'll have. However, in reality, it doesn't always work that way. Some people work 12 hours a day and have little money to their name; while others work less but have millions in the bank. So what's the difference? Could it be investments?Investments can be risky, as there are a lot of factors to think about. You may be scared of losing money, or you don't know where to start. However, investing is actually quite simple.
What is Investing?
Anything that you put money into, with the intention to earn more in the future is merely investing.
- Clothing is often purchased at a wholesale price and then sold at a retail price for a profit.
- Some people buy collectables that's value will increase over time.
- Even buying a house and renting it out to tenants.
What are the Types of Investments?
There are four main types of investments, which are known as Asset Classes:
Bonds are also known as fixed interest securities. You put money into a bank, and you gain from the fixed interest.
You can put your money into a savings account, and over time, it will earn interest.
You buy stakes in a company and earn if the company makes a profit.
Buying land or a house and have it rented out.
Other types of investments also include:
You buy foreign currency and sell them when their value increase.
Buying naturally-occurring products that re are traded, such as oil, gold, or corn.
Buying art and antiques whose values are sure to increase over time.
How Do You Earn?
Your earnings from your investments are profits, which is how you gain. Here's how:
- Dividends - You receive from your shares when you invest stakes in a company.
- Capital Gains - The profit you earn from buying and selling; you purchase a product at a specific price and sell it at a higher price.
- Rent - When you buy a property, and you rent it to 1 or more people.
- Interest - When you put your money in a savings account, the provider gives you a fixed/variable rate where you will earn a certain amount of interest on your saved money.
It's important to note that investing is not a get-rich-quick scheme. Investing does not work overnight; instead, it works over a long time, and some returns, you may not receive for decades.
Investments are not risk-free
If you put your money into a savings account and it earns interest over time, it may not keep up with the rate of inflation. Like all types of businesses, investments are a risk.
Why You Need to Invest
There are many reasons why you should invest. While you may be working for money now, investing makes your money work for you. Whether you want to earn more for your retirement, plan to build your dream home or give your children a good financial start, investing will help you achieve your financial goals.
Paul Dodd Asset Management Limited is committed to providing independent financial management throughout Leeds and North Yorkshire. If you need to speak to our investment advice specialist today, please get in touch to discuss the ways that we can help you.