Investing may sound like some Wolf of Wall Street thing that’s only for rich men in suits who smoke cigars, but it’s really not. Investing is just a broad term for managing money in a way that aims to make a profit. To invest is to put money into something offering a potential profit. At its safest, investing isn’t much different from a savings account. At the more complex end, investing is buying expensive, high-risk stocks and trying to predict the best time to sell them for more than you purchased them for.
If you’ve got some money stashed away that you think you might want to invest now or in the future, keep reading.
Generally, people don’t start investing until they’ve saved a decent chunk of money. Some experts suggest that you should first save about six months of wages in your savings account as an emergency fund, then only start investing with funds on top of that. You can read more on whether you’re ready to invest here.
Getting yourself a financial advisor is an option and they can provide some good advice for your financial situation. Different financial advisors charge different amounts, so it can be worth shopping if an advisor is the way you want to go.
However, an alternative is to do your own research to figure out the type of investments that best suit them. It’s also worth asking for advice from friends, relatives and mentors who have experience with investments, but ultimately, the final decisions are up to you.
The four main types of investments are cash (as in savings accounts), bonds, shares and stocks, and property.
A company may distribute its profits to shareholders based on their percentage ownership. These are called dividends, but not all people buy stocks for the dividends. Some investors buy stocks at a certain price, hoping that later on, when the company is more profitable, they will be able to sell those stocks for more than they bought them for.
Some companies’ stocks are less risky than others. Less risky stocks are typically in companies that are well established and grow their value slowly but surely. They’re safer because even when they report losses, it’s more likely that they’ll go back up eventually. Companies that grow rapidly have faster growing profits and therefore higher returns but they’re also at risk of rapidly losing value if the outlook for profits changes.