Investing can sound like a complicated and scary thing if you don’t know what you are doing. On the other hand, if you understand some of the fundamentals and you approach investing the right way, it can become not only interesting (and somewhat enjoyable), but potentially profitable.
With that in mind, we’re going to use this article to dive into five specific types of investments for beginners to consider.
1. Real Estate
Real estate investment is when you purchase either land or a physical building with an aim to profit off of it. Assets might include anything from farmland, to residential properties or condominiums, to commercial buildings. The real estate market is considered by many to offer great investment opportunity simply because people always need homes to live in, and property value is thus often on the rise. Concerning the local market, a previous article on new builds from Haart & Hillcrest, conveyed that the appetite for new-build homes in particular will continue to grow, and that the future of the industry in Milton Keynes looks exciting. This is similar to what we’re seeing in real estate markets in much of the western world.
If you’ve ever visited a foreign country and exchanged some of your money for the local currency, then you’ve already participated in forex trading, of a kind. Foreign exchange, or simply forex, is exchanging one national currency for another. And while it’s done during travel all the time, some investors approach the concept as a market –– trading currencies back and forth in order to profit. Forex is in fact one of the most actively traded markets in the world, and according to FXCM it can be engaged with via a simple online account (meaning you don’t have to go through the hassle of exchanging actual currency in-person). Once you’re set up, you can buy and sell currencies in “pairs,” such that you’re always exchanging one for another. In this way, investors seek to capitalize on differences with timely decisions.
When people invest in stocks, they buy shares of the corresponding company –– which translates to buying a small piece of the company. If the value of the company goes up, the value of the shares go up as well. The owner of the stock can then sell
their shares for cash and keep the profit, or hold out for greater gains over more time. Naturally, companies that perform poorly and lose value can also lead to losses. Investors need to study markets diligently in order to gauge potential; they also need to diversify holdings, such that no one set of shares in a given company causes an entire portfolio to sink or swim.
A bond is fixed interest security in which the owner will be paid a fixed percentage of the loan amount at the end of the term –– also called maturity date. This is basically an IOU from the government or company issuing the bond. Practically speaking, you are lending them your money and they will pay you interest upon returning the loan. These low-risk investments are preferred by many people because they offer a high level of safety and security –– making them particularly appealing as aspects of retirement savings, reports CNN Money. That said, the returns are not usually as high as those one can earn from other investments.
An investment in cash savings is prudent and secure. While the monetary returns in a savings account are not as high as other investment types (and are dropping, according to The Guardian), there comes a sense of confidence and security from knowing that you have cash reserves in your savings account. After all, you never know when an emergency, accident, or unforeseen circumstance may occur. Furthermore, some like to place a portion of their investment capital into savings simply because appreciation in these accounts requires quite literally no effort or expertise. As with any endeavour, the hardest challenge in investing is taking the first leap. It is important to figure out which types of investments you are most comfortable with, whilst considering the risks and benefits of each option. Start by studying the five areas mentioned above though, and you’ll be that much closer to establishing a strategic, diversified portfolio.