Everyone has a financial goal. Whether it is saving up for a holiday or buying a house, we all have aspirations that finance to achieve. If you are looking to invest, it probably means that you have built up a savings pot and have realised that it is being eroded in real terms by 1%-2% per annum. You want to turn this erosion into a positive return.
Investing can be as simple or as complicated as you allow it to be. Anyone can do it, and it requires as little or as much time as you are prepared to invest.
There is a vast array of different asset classes, or types of investment, available.
The most common are shares and bonds, although some people also invest in property or commodities. My blog focuses predominantly on shares, but touches on binds and on alternative forms of investments such as crowd funded equity.
So, shares. A share is, simply put, a stake in a company- this could be Tescos, HSBC Bank or any other company listed on the Stock Exchange. Shareholders benefit from either dividends paid out when the company makes a profit, or by selling the shares for more than you buy them for. Whist we could discuss ‘short selling’ this is not something I practice and not something I advise on.
Before you look into buying shares it is important to do a couple of things:-
- Open a Share dealing ISA – this will mean that some of your gains will be tax free.
- Open a share dealing account will a reliable broker with low fees. Even small fees will eat away at your profits if you trade frequently.
and then, before you buy, remember:-
- Research the companies you want to invest in and make sure you are comfortable ‘taking the plunge’
- Never invest more than you can afford to lose, as the value of your investment can go down as well as up. Down includes all the way to zero.
- Do not invest everything in one or two companies. It is also good practice to invest over several sectors to mitigating the risk to your portfolio, and also to hold on to a portion of your portfolio as cash to enable you to take advantage of opportunities as they arise.
- Consider investing in a fund which is designed to invest your money as part of a larger pot in a portfolio of assets, rather than buying individual shares.