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Understand The Basics Of Investing

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  • 05-08-2019
Understand The Basics Of Investing

As long as you keep your money in a piggy bank and keep it in a secure place, your money is safe. After days, weeks, months, or even years, the piggy bank will have the same amount of money you saved, as there is no interest added on. 

What's even worse, the value of the money you have saved will depreciate over time, as the cost goods and services rise. This rise and fall of the value of money, goods, and services are known as inflation.

Here are several investments terms and options you are likely to encounter in the future. Understanding them will make investing easier, so you can make wise investment decisions and build your wealth. 

Stocks and bonds

Instead of keeping your money in the bank or piggy bank, investing in stocks is one of the best ways of increasing the value of your money. Once you have bought shares, you become one of the owners of a company and will be eligible to receive profits and dividends. 

While bonds are loans to a company or a government, you will be paid your money back with interest. Companies will use the money to finance the expansion of the business, whereas governments will use the money in the building of infrastructure. Buying bonds is one of the safest ways of making money.

Investing in mutual funds

A mutual fund is where investors pool their money together to buy stocks or bonds. Wealth is professionally managed to ensure clarity. It is a popular way of owning shares or bonds, or even both. Investing in mutual funds has many advantages, especially new investors.

It is faster and more secure than buying stocks or bonds individually. Usually, you will be forced to go through a lot of verifications and documentation, which can discourage a new investor. It is straightforward for a new investor to acquire shares or bonds through a mutual fund. However, mutual funds have their limitations too. As an investor, you are open to a lot of charge's which may affect the profits you are supposed to get after trading with your shares or bond.

Property investment

The world's population is continuously growing. As a result, the demand for homes, business premises, or even office blocks is always high. The value of the land a real estate resides on will always increase in value. Investing in real estate is one of the best ways of building wealth, and creating a steady flow of income.

You could go down the path of buying real estate investment trusts (REIT), which has all the benefits of stocks merged with other physical properties such as, land, building or any additional imaginable investment.

Investing is not for the faint-hearted. However, with knowledge and experience, investing becomes more accessible and profitable. As an investor, understanding the above information can help you grow your wealth effortlessly.

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.