A Beginners Guide to Investing
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There are almost as many ways to invest as there are Instagram posts about it (1.4 million for #makemoney when we last checked). So, to make it simpler, we’re introducing you to three of the most popular ways...
#1 Lend your money
The government wants your cash. No, not in the form of more taxes but as bonds. Same goes for certain companies. If you buy a bond, you're lending the government, or the company your hard earned cash. What’s in it for you? They pay you interest for using your money. If you want to know more about bonds, we have a guide for this. You may also find saving bonds at your bank. This means you deposit money with them for a fixed amount of time and they pay you interest in return (not a bad deal right?).
I’m not into bonds…
Another way to lend money is to share it with individuals using a peer-to-peer platform. If that sounds strange, it’s because it’s a fairly new concept in the UK. How it works is through an online platform that connects lenders with people or companies that need loans. The bonus is that you’ll get paid more interest than your bank’s saving account. The catch? You’re taking a slightly higher risk. Unlike stashing your savings in a bank, your money is not insured. But, many of these peer-to-peer platforms have a provision fund to cover any shortfalls in loan repayments. Phew.
#2 Buy some shares
If you do this you’ll own a part of a company. A teeny, tiny part, but a part nonetheless and how cool is that? Very! Especially if you consider that when the company profits so do you since you share a sliver of it (and we really mean a sliver!). It’s also good news for you if the company’s value increases because, hey presto, the value of your share increases too. The risk is that it all goes to pot and the company under-performs and its value falls.
Where do I sign up?
You’ll need to open a share dealing account with your bank or a broker. That’s the traditional way of buying shares. Most now offer online accounts. You can select the company you're interested in and decide how many shares you want to buy. We have a guide for this.
But first, highlight, screen grab, take a mental note of this point, it’s THAT important: One of the rules of investing is to diversify. So, rather than piling all your money into one company or one industry, spread it around and build up investments across different sectors, companies and even countries.
#3 Buy into a fund
You can invest in a fund if the above is too big a job for you. A fund uses money pooled together from hundreds or thousands of people to invest in lots of different things. You can buy into them through your bank or an online broker. You’ll get to see what’s in the fund before you invest. We have a guide for this.