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The rewards of investing

Investing can seem complicated, but the core idea is really straightforward. Investing is about putting your money behind things that you expect to grow in value over time: whether that’s real estate, in-demand items like barrels of oil or Beanie Babies c. 1997 – or, most commonly, shares of a company (aka its “stock”).

As these investments get more or less popular, their prices change – and if you’re lucky, those changes will keep trending upwards. 🤑 Some investments also pay out without you having to cash out: bonds offer regular interest payments (more on this below), and some stocks pay regular dividends.

Staying invested over time can bring with it the prospect of big returns – but there’s no such thing as a free lunch. More money often means more risk: you could get a nice payday, but unlike a savings account, your investments might also make a loss. 😱

What can I invest in?

The options are truly limitless, but one popular way to get started is with some kind of investment in big companies. You could do this by buying tiny shares of your favourite firm, but you’ll be putting all your eggs in a single basket. If things go wrong and the share price falls, you could be headed for a Humpty Dumpty-style wipeout. 📉

Another option for new investors is to invest in a fund. These are essentially baskets of shares from different companies, so they let you spread your money across a whole range of different businesses in just one click. You can buy or sell many of these quickly.

Exchange-traded funds or ETFs, for example, can be a good way to get started. And if you’ve got a hunch – like the curved fruit market going bananas – you can even get quite specialised, investing in an ETF that tracks companies in a specific country or sector (although this may reduce your portfolio’s diversification). 🍌

You don’t just have to invest in shares of companies (also known as equities).

Bonds involve little old you lending money to companies or governments, who’ll thank you for the privilege with regular interest payments. Bonds tend to offer a smaller return than equities, but they’re more stable ⚖️ and (barring the lender going bankrupt) you will also receive the bond’s notional value at the end of the bond’s term, so there’s a lower risk of losses.

You can also invest in things like currencies 💷 and commodities 🛢️ – raw materials such as oil, gold, and sugar – and even real estate. These, like the other investments mentioned, bring with them their own risks and potential returns.

How do I start investing?

For UK investors, the best way to get started is probably by using your Stocks & Shares ISA allowance: this lets you invest a decent amount each year without getting taxed on your gains. Such ISAs are available from a wide range of providers, who then let you buy shares and funds through their platforms.

However, you don’t need to use an ISA to open an account - General Investment Accounts (or GIA) are also an easy way to get started.

You can access loads of historical data to get an idea of how an investment has performed in the past – but as every financial platform loves to (OK, has to) warn, past performance is not a guarantee of future results. ☝

Making decisions for the future

Investing is all about making decisions for the future. Old salts like Warren Buffett talk about finding great companies, putting money into them, and leaving the cash there for as long as possible.

With enough patience, your investments should grow healthily – over the past ten years, UK stocks have gone up by about 70% and US stocks by 230%, which isn’t to be sniffed at.

At Wealthyhood, we do love investing, long-term investing! 🥰 That’s why we give you the tools you need to make building your long-term wealth easier.

But if you really don’t want to be a long-term investor, there’s another way. Enter trading… It’s not our favourite, but we have to mention it. 😇

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Source: Finimize

Keep in mind that when you invest, your capital is at risk. This learning guide is for information purposes only and is not intended as investment advice. Although this material is intended to be educational, it may promote the services provided by Wealthyhood.