Whether you have relatively small or large sums of money there is a lot of potential when you choose to invest, just as long as you know where to put it and for how long. Here are some things to consider when you want to use investments to save money and make a profit.
One of the main terms you’ll be hearing about in the world of investments is asset allocation. It may not sound too exciting but when it comes to investing it’s one of the most important things you’ll do.
Essentially it involves putting your money into different shares, bonds and cash, spreading your investments across different assets so that you’re protected in case things take a turn for the worse.
With these three assets you’ll usually find that shares provide the best returns for your money over time, but they can also be the biggest risk.
Elsewhere you have bonds, which are typically less unpredictable but this is offset by the fact that they deliver lower returns. The safest option is cash, but you’ll only enjoy low returns if this is your main form of investment.
After thinking carefully about these assets you’ll want to diversify, so that you don’t end up putting too much of your money in one place.
A lot of your decisions will be based on how much you can afford to lose, the period of time you want to invest for and what your attitude to risk is like.
Another important thing to consider is how much time you’re willing to spend researching and finding out the ideal investment choices.
For active investors it pays to have a critical eye, and a mindset which helps you to avoid backing stocks that aren’t going to be a good long term investment.
Make sure you evaluate your investments carefully, and decide beforehand whether they fit into your strategy and portfolio or not. If you’re not prepared to do a fair amount of research before you place your money somewhere then investing may not be the right thing for you.
Investing is a long term game, and while it’s easy to panic when your choices aren’t doing too well it’s vital that you stay calm and don’t let emotions rule your decisions.
This is something you should be doing if you have some money saved up and you want to watch it grow, not if you’re looking for ways to get out of debt (you should be looking at things like IVAs and Scottish Trust Deeds for this).
With all this in mind, and as long as you’re careful to build a unique portfolio that reflects your interests, then you will be starting off on the right foot when it comes to growing your investment.