Tips on Choosing a Good Investment

If you have spare money, then you may want to make sure that you get a good return on it. With savings interest rates so low, it can be tempting to feel that investments are the only way to make a decent amount of money. It is worth learning more about investments as well as about ways to manage money before you think about choosing one.

Options for your money

Before you decide that you will definitely invest, it is worth thinking about all of the options that you have. If you have loans such as the short term offerings from Cobra for example, it could be better to repay those rather than invest. Investments can make high interest and you may make more money with them rather than repaying a loan. However, you will need to examine the figures in detail to be sure. It may be that you will feel better if you can pay some money off a loan or that you do not really mind about the loan and would rather make more money elsewhere.

All about investments

It is important to understand that investments can be risky. Many people do not realise that when you invest in something you may not get your money back. An investment is very different to saving. With savings you will get interest paid on the money and you will be able to get your money back when you need it. With an investment you buy something with the money and then have to sell it again to get your money back. The item you buy could go up or down in value and you will obviously hope that it goes up. However, it could go down in value and you may even end up with none of the money that you paid in, to draw out.

Investments do vary in risk. The lower risk investments tend to have a lower return and the higher risk ones tend to have a higher one. This will vary across individual investments but tends to be the case generally. You will also need to be prepared to tie your money up for a long time. It takes time for things to gain in value and so you will need to be prepared to wait. It is easy to assume that many people make big gains in investments as we may hear about this happening and we may also see adverts implying that this can happen. However, this tends not to happen to most people and we do not hear so much about all of the people that have lost their money. 

What to choose

If you are thinking of investing then it is best to use money that you can afford to lose. Although the chance of you losing all of it is small, it may go down in value and so it should not be money that you are relying on in the future. You should also consider how much risk you are prepared to take with the money and choose a relevant investment based on that. Then you need to think about the amount of time that you are prepared to tie it up for. Investments should really be for at least five years if not ten or more and therefore you need to make sure that you are happy with that.

When it comes to actually choosing a specific investment, some people will use an independent financial advisor. You will need to pay them, but they will be able to give you the benefit of their experience and let you know which funds they would recommend based on the amount of money you have available to invest and how long you want to tie your money up for.

If you do not want to use an advisor then you will need to do the research yourself. This can be tricky, but it is possible. You will need to be particularly careful of companies promising you huge returns for investing for a very little time as these are likely to be scams. It is worth spending a lot of time doing extensive research and looking at reviews, contacting companies and scrutinising figures before you invest any money. It can be a tricky business and there is never a guarantee even if you choose a fund with an experienced fund manager to invest in.

Some people may feel that they will reduce their risk by spreading their funds or by just investing a small amount. Unfortunately, some investments will have a minimum investment amount and if you spread your funds it tends to reduce your chance of a high return, although it may lower your risk. It can get very complicated. This is why it is so important that you are confident either in your advisor or your own research before you pay out any money.

Be the first to comment on "Tips on Choosing a Good Investment"

Leave a comment

Your email address will not be published.