This is a guest post from Sachin
This article examines some of the most common ways to invest your money, such as investing in property and in the stock market.
You aren’t accessing the full potential of your money if you let it set idly in your pocket. There are a number of great ways to invest your money that can allow you to greatly grow your assets. You can invest with your bank, with bonds, in the share market and in property investment.
For those interested in investing their money, we shall cover four popular types of investment and detail their strengths and weaknesses.
Bank Term deposits
These short-term investments are a specialised deposit made at a bank and accrues interest at regular intervals. The money, however, is locked away for a nominated period of time. After the term deposit matures you get the original amount you deposited plus the interest it made.
The Positives• Has a higher interest rate than other bank investment types (like a savings account)• They’re set at a fixed rate. You will know exactly the amount of money you will receive at the end• The money you invest is insured
The Negatives
• The money is locked away. You cannot make withdrawals on it or additional deposits
Investing in the Share Market
When investing in the stock market you are buying shares, which represent proportions of ownership in a company. As you increase the value of the business you will also improve the value of your shares.The company you have shares with will often pay a dividend twice a year (based on the value and the number of shares you own). You can also make money by buying shares when they are low in value and then sell them when they are a higher value. Investing in the share market can be volatile and prices often fluctuate.
The Positives
• Anyone can invest in shares! You don’t have to be rich to own shares in a company. If you’re smart and buy and sell at the right times you can easily grow your wealth• You can make a lot of money quickly from shares, depending on luck and the trends in the share market
The Negatives
• The value of shares can fluctuate drastically. You can lose wealth if the value of your shares drops• If the company goes bankrupt your shares can become worthless
Investing in the Property Market
There are a number of different ways you can invest in the property market. You can invest in residential property and gain wealth via the capital growth on your home. You can invest in rental properties and commercial properties and lease the realty out to tenants and businesses and gain an income from both the rental rates and the capital growth of these properties.
When investing in property, speak first with a financial adviser and a property market specialist. These professionals have the experience and access to property valuation software and can help you make a viable and wise investment choice. Also, when investing in property it’s suggested that you invest for the long term.
The Positives
• You can gain huge amounts of wealth via the capital growth and rental returns on investment properties• You can borrow money and take out a mortgage against your own home to finance your investment property• In certain circumstances there are a number of lucrative tax benefits available than can help reduce your taxable income
The Negatives
• Owning an investment property can be expensive! If you buy into a poor growth area and can’t find tenants straight away, your investment property may begin to eat into your other finances.• If you have to sell your property prematurely you can lose a lot of wealth and even land yourself deep in debt.
Investing in Bonds
Bonds are a type of lending investment that is issued by a state or a company. A bond is essentially a debt security, in which the issuer of the bond owes a debt to the bondholder. With bonds, the principal and the interest rate (which is set at a fixed rate) are payed back to the bondholder at a later date.
The Positives
• Some bonds are a low-risk investment• They are extremely flexible and can be invested in for the short, medium or long term• The interest rates are fixed
The Negatives
• The value of bond yields can vary greatly.• State bonds, because they are government owned, have a lower interest rate and are relatively secure but countries and states can still fail.• Corporate bonds are more risky and have a higher interest rate and if the company goes bankrupt you can end up with nothing.