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A Guide to Investing for Beginners

When you work hard for your money, you then want it to start working hard for you. This is where investing comes in. Investing can seem extremely daunting at first if this is something that you have no previous experience in, however, it is something that is extremely important for your long-term financial stability and future. Investing is not something that you should simply jump straight into, which is why we have created this easy to understand beginners guide to investing and how you can start saving for your future today.

What Exactly Is an Investment?

There are many different ways in which you can invest your money, from property to stocks and shares. More and more people are now turning to investing with bank saving interest rates so low. There is a common belief that you need huge lump sums of cash if you want to start investing, however, this is simply not the case and you can start investing with small amounts of cash to begin with. This could either be through your savings, or you could also start saving today by taking out a payday loan.

Payday loans can help you get started investing instantly and any profits made can then be used to pay back your loan. You can make use of company websites such as unclebuck.co.uk who have an easy-to-use tool to work out how much you can afford to borrow.  As long as you have budgeted for this and can pay off your loan in the short-term then you can start making your first investments today. You should also set yourself financial goals when investing and place realistic timeframes in which you think you can achieve these goals.

 Why Do People Start Investing?

Everyone has different financial goals and so it is important that you determine why it is exactly you want to start investing. It is important to different people for different reasons. For some, they will be looking to generate extra income in the short-term, for others, this will be a long-term strategy thinking about their future. This money could be used to buy a new home, for retirement, or to pass onto your children. With interest rates offered by banks not keeping up with the rate of inflation, investing is a far more attractive option for people. However, it is important to remember that there are more risks attached to investing and they can go down as well as rise.

Assess Your Goals

As we mentioned before, everyone invests for different reasons and it is important that you assess this before making your first investment.

One goal that many people have is to invest for extra income on top of what the already earn in their salary. This could be generated from shares that pay out dividends or it could be bonds that pay interest.

The second goal that many people have is to invest for growth. This means that you increase the value of the investment itself and this is commonly known as capital appreciation or capital growth. This could mean potentially holding your investments for a very long period of time and grow their overall value.

You will tend to find that investors combine a mixture of both these strategies to gradually increase their income and assets.

Should I Buy Shares or Funds?

If you are just starting out investing, you will probably either invest in shares or funds, both of which have their own pros and cons. It is also common to have both in your investment portfolio.

If you are buying a share, this generally means that you will be purchasing a small stake in a business. The advantages of this are that you can choose specific companies that you want to invest your cash in and if the company is successful then there is the potential to gain some huge rewards in both share price increases and dividend payments. The negatives with shares are that it is entirely down to you which companies you predict will have a successful future and those that do not perform as well could end up losing you the money that you invested.

The other option you have is to invest in funds. This pools together money from many different people and then a fund manager will use this pool of money to invest in lots of different assets. The great thing about funds is that an expert manager will buy and sell funds on your behalf and so If you don’t have much experience then this is a good option. What’s more, as there are many different investments being made, it is less risky than individual shares. However, you will have to pay a fund manager for their expertise and you can probably expect a lower return on your investments as there is less risk.