Investment is not just about thinking of something to do with our spare cash, it is about having our money make a profit for us either in the short term or in the future. Money that is simply left in an account that earns no interest is in effect losing money and reducing in value by the day. This is not what investing is about. Making the most of the money we have spare is about growing its value.
If you read on, then we will hope to have given you some tips that will help you to become a better investor.
Consider Tax-Free Interest
When you are investing in a plan, think about whether or not the interest is taxable. This can make all the difference to the interest that you will receive from having invested your money.
It is not just about the type of policy, either, it can be about the amount that you are investing. For example, in the UK, and at the time of writing, you can get up to £5,000 of interest before you will be taxed on it. This is the government encouraging us to save, and perhaps for our retirement. The advantage of an investment plan over a pension plan is that you can still get hold of your money before you are in your 60s. You have greater control over what you are putting by for the future while earning more interest than you would with conventional savings accounts held by a bank.
So, the advice here is to be tax-efficient in your thinking as an investor.
Do not place all of your investments in one place. Spread your investments around, so that any losses are kept to a minimum should they occur. The volatile markets that exist, particularly when investing in shares, might be a reason to consider risk spreading.
When you have a large sum to invest, there is no better long-term investment still than property. It offers a dual benefit as a type of investment in that it is historically more likely to rise in value and also be something that you can earn a regular income from when you rent out a house.
Ensure that you have a sufficient understanding of the risks involved in investment and how share prices can fall as quickly as they can rise. The share markets are prone to volatility and fluctuations. They are one of the riskier forms of investment. However, in return for that risk, you can receive greater returns.
Investing in cryptocurrencies can be compared with share dealing in terms of its unpredictability and risk. So, you will need to get some sound advice if dabbling in digital currency markets such as Bitcoin.
Do not invest any money in shares or currencies that you cannot afford to lose at least some of. It is tempting to put more in than you can afford when good returns are promised. The fact is that nobody knows for definite what might happen in the future with economies. The pandemic has proven that.
If using a savings account to invest, then try and pay into it a regular amount each month. You will be pleased with how it soon adds up. Also, by fixing a regular amount you are making sure that you save it. You could perhaps set up a regular transfer between a current and a savings account through the bank that takes care of it automatically for you. The more money that goes into your savings account from your current account, the more interest you will likely make. That is when interest rates are good.
Consider reinvesting the money you have made from a previous investment so that you can go on increasing the value of your investment fund or portfolio. Gaps in investment time will otherwise mean lost interest that you could have made from your available money. That is while you had the money available, which may change.
To end on something that ironically we should have considered first, always formulate a plan before you begin investing. Then keep on reviewing that plan to make sure that your pot of money is growing. This will ensure that your investment strategies are controlled and affordable. Incorporate your investment plan within your household budget to allow for the outgoing. This can be simply written on a sheet of paper or inputted onto an excel spreadsheet. The advantage of spreadsheets is that they total columns for you when formulas are entered into their cells. They are also good for changing figures because everything will then automatically recalculate, as long as you have the formulas set right.
To conclude, lots of tips here, but start with a plan and think about what types of investments are for you. Whether you want to invest more safely or take a few risks for greater return. Be careful, though, because even financial advisors have been caught out when economies in different countries have experienced unpredicted problems. Do not be deterred, though, and we wish you well with your investing.