A lot of people have heard of investing, and understand it’s an important step in securing their financial future, but just don't know where to start. Taking the plunge and investing in the stock market for the first time can be a daunting task - but it doesn't have to be.
Figuring out what you're comfortable with and doing your research is crucial. You want to make sure you're investing in something that has potential to give you good returns. For some people, investing money into stocks is the best way for them to grow their finances. However, there are other options out there, and what works for one person might not be best for someone else - someone’s investing journey and process is unique to them and their own appetite for risk, and their financial goals. For example, outside of stock investing, you can also invest in bonds, commodities, property, and even cryptocurrencies. Whatever route you choose, it's important to create a plan and manage your finances carefully. With a little effort, investing can be a great way to secure your financial future.
A lot of people think that investing is only for the rich - it’s a world that can seem inaccessible, overly complicated, and ridiculously risky... But it really doesn’t have to be! Anyone can start investing, no matter how much money they have, and even without any formal financial training or education. Investing is one of the best ways to grow your money over time, and should be something everyone considers as part of their budget. That doesn’t mean it is for everyone, as everyone’s personal situation is unique, but it’s always a good idea to spend some time to educate yourself on the process and how it works, to decide if it’s right for you.
Nowadays, you can start investing with just a few pounds, from the comfort of your own home, and one of the most popular choices is to invest in stocks. When you buy stocks, you become a part-owner of a company. When the company does well, the value of your stocks goes up, and when the company does poorly, the value of your stocks goes down. Some companies will even pay out some of their profits to all their shareholders once or twice a year - this distribution is known as a “dividend”.
Investing in stocks can be risky, but it's also one of the best ways to make your money grow over time. It’s important to do your research and spend some time educating yourself on how to pick stocks - there are many valid strategies for this, which can be as simple as buying shares in companies you personally know and use, or trying to determine what companies you think might explode in popularity over time.
There will always be some guesswork involved, but there are ways to mitigate the risks involved with investing, such as making sure to diversify your portfolio to include assets from many different industries and countries to protect yourself against sector or country-specific downturns.
The key to successful investing is to start small and invest regularly. This can be done through pound-cost averaging, which is investing a fixed sum of money at fixed intervals. This means that instead of buying as low as possible and selling as high as possible, you opt for a steady and stable rate or purchase. This ensures that you’re never going to just buy at the absolute highest cost. It is a good way to mitigate the risks of badly timing the market. Find out more about pound-cost averaging here
For example, if an investor buys shares of a stock every month, they are pound-cost averaging. By investing small amounts of money over time, beginners can minimise the risk of losses and build up their portfolios gradually. In addition, investing regularly helps investors take advantage of the power of compounding, which is when earnings from investments are reinvested and generate additional earnings. Over time, compounding can help investors earn significant returns on their investment.
When it comes to investing, there are a lot of options out there, and it can be tough to know where to start. But whether you're looking to invest in stocks, bonds, or real estate, there are a few things you should keep in mind. First, you'll want to consider your financial goals. What are you hoping to achieve? Are you looking to grow your wealth over time, or do you need immediate income? Once you know your goals, you can start to look at different investment options. For example, if you're looking for growth, stocks may be a good choice. If you need regular income, bonds may be a better option. And if you're looking for stability, real estate might be the way to go. There isn’t one “right” solution to investing, so it's important to do your research and figure out what's right for you.
One popular option is to invest in ETFs, or exchange traded funds. These are grouped baskets of stocks that you can buy as a sort of package deal, created to track certain industries or sectors. For example, you can invest in ETFs for technology companies, or for green energy. One of the most popular ETFs is the S&P 500 - this is an ETF that tracks the top 500 biggest companies in America. These types of funds tend to be more stable than individual stocks, and they provide diversification, which is when you spread your investment across different types of assets to reduce risk. Wombat Invest is an app that provides access to many of these ETFs through themed investing, so you can invest in “The Techie”, “The Foodie”, or “The Gamer”, among others - making it really easy to invest in specific sectors or industries.
You’ve probably heard of bonds before - but what exactly are they, and why should you care? Bonds are simply loans that corporations or governments make to investors. In exchange for lending money, the investor receives regular interest payments until the bond matures, at which point they receive their original investment back. Bonds are relatively low-risk investments, which makes them a good choice for older investors or those who are risk-averse. They can also be a good way to diversify your portfolio and protect your money in volatile markets. Of course, bonds are not without risk – if the issuer defaults on the loan, you could lose your entire investment. However, this is relatively rare, and overall, bonds can be a safe and steady way to grow your money, but the lower returns are off-putting for many.
A lot of people think that investing in property is just for the rich. But there are plenty of ways to get started in property investing, even if you don't have a lot of money. One way is to look for properties that are in need of repair or are being sold by motivated sellers. These types of properties can be purchased at a discount, and then either fixed up and sold for a profit or rented out for a steady income. Another option is to invest in a vacation rental property. This can be a great way to earn income while also getting to use the property yourself. You could also invest in stocks or ETFs for property companies, or get involved with peer 2 peer property lending - this is when you lend the money to a company looking to buy property, such as developers looking to build apartments, or a corporation looking to build a new shopping centre. This type of investing can be risky, but can also offer stable, higher value returns compared to some other options out there. As always, do your research first!
Many people choose to invest in gold as a way to protect their wealth. Over time, gold has proven to be a reliable store of value, maintaining its purchasing power even in times of inflation. Gold is also a convenient way to diversify one's investment portfolio, since it is not closely correlated with other asset classes such as stocks and bonds. Additionally, gold can provide protection against currency risk, since its value isn’t derived from any particular currency. For all these reasons, investing in gold can be a wise decision for those looking to preserve and grow their wealth over the long term.
If you're looking for an investment with potential for high returns, crypto is worth considering. Of course, there's no guarantee that you'll make money on your investment, but the upside potential is hard to ignore. With the recent surge in popularity of Bitcoin and other cryptocurrencies, now is a great time to look into it and see what all the fuss is about. That said, more than anything else on this list, crypto is one you want to do your due diligence for. While many have gone from rags to riches via bitcoin, many others have lost everything just as quickly. This is a relatively new and unregulated avenue for investing, and we don’t have much historical data to make guesses about what the future holds.
Feeling ready to get started? Before you dive in, take a step back, and make a budget. I know, I know - making a budget may not be the most exciting task, but it is an essential step in managing your finances.
Firstly, figure out how much money you have coming in each month. This includes your salary, any side hustle income, and any other sources of regular income. Once you have your monthly number, it's time to start tracking your spending. Track everything from your rent or mortgage payment to your shopping expenditure to your streaming services. Once you have a good idea of where your money is going, you can start making adjustments to ensure that your spending aligns with your goals. This will also help you to determine how much you can actually afford to invest each month.
Once you have a budget, you should figure out how much risk you’re willing to take on. When it comes to investing, there is no "one size fits all" approach, we use the Wombat chilli to depict ours. Each person has a different level of risk tolerance, which should be taken into account when making investment decisions. There are a few key factors to consider when determining your risk tolerance.
First, think about your overall financial goals. Are you looking to preserve capital, generate income, or grow your portfolio? Second, consider your time horizon. Are you investing for the short term or the long term? Finally, think about your comfort level with volatility. How much fluctuation in the market can you tolerate without panicking? Answering these questions can help you to identify your personal risk tolerance, which will help you to pick what assets and what investment strategies are right for you.
It’s important to keep in mind that “buy low, sell high” is easier said than done. It can be tempting to invest in a hot stock that is on the rise, but this can often lead to buying high and watching your picks tumble down towards eventual losses. Rather than trying to hop on trends, you may want to consider a long term investing approach - remember that so far, the statistics to back up the fact that “time in the market beats timing the market”. It’s not the most exciting strategy, but picking stocks you think will still be alive and kicking in 10 years may provide a higher level of consistent returns than jumping onto the next meme stock.
Finally, don’t forget about diversification. By spreading your money across different asset classes and geographic regions, you can minimise your risk and maximise your chances of achieving your financial goals. The most important thing is to develop a plan that makes sense for you and stick with it over the long term.