The act of investing involves putting money into financial schemes, shares or property with a view to achieving a profit.
Due to fluctuations in inflation – the general increase in the price of goods and services – money that is not invested is at risk of losing value in real terms. Investments give you the opportunity to retain or increase the value of your funds in spite of inflation, but not all of the options are a secure guarantee.
You only need a minimal amount of money to be able to invest, and starting small is a great way to experiment with investing while you get accustomed to the process and its benefits and risks.
Common ways to invest
- Fixed-rate bonds
One of the most straightforward ways to invest is to open a fixed rate bond with a bank. These work in a similar way to standard savings accounts, but the interest rates tend to be higher, and you cannot touch your funds for a fixed term once you’ve made the deposit.
As a reward for leaving your money untouched, you’ll receive annual payouts from the bank in accordance with the interest rate of your fixed rate bond. As the name suggests, this interest rate won’t change for the duration of your investment, so you know exactly what to expect.
- Shares in the stock market
A less secure but potentially more rewarding option is to play the stock market. This involves buying shares in companies and selling them at a later date, with the intention of coming away with more money than you initially put in.
As the stock market is constantly fluctuating due to various factors, some of which are impossible to predict, this form of investing involves a degree of risk. Depending on the success of the company, global economies and world events, your shares could skyrocket or plummet in value.
There are safety measures that you can put in place to help protect yourself from a sudden loss. Stop-loss orders send an automatic instruction to sell when a share reaches a certain price so you can have peace of mind within certain parameters.
You can also choose low-risk stocks over high-risk options, and spread your funds between several investments rather than going all-in on one initially attractive company.
- Property
Almost guaranteed to give you a profit on your investment, property is a popular option for making the most of your money. However, not everyone can explore this avenue as it usually requires a sizeable initial deposit.
Simply acquiring a house and living there is a good way to protect your money as your home will likely increase in value over time, so you can make a profit on the eventual sale.
More creative ways to invest in property include buying rundown buildings and fixing them up to increase their value before selling them on for a profit, and renting out owned properties for a monthly income from the investment.