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Knowledge Hub

5 min read

Investing 101 – a beginner’s guide

Finance & Money March 25, 2019 By Budget Insurance

While investing is a tool for building wealth, it isn’t only for the wealthy. It’s possible to start with small amounts and add to it as and when you can afford to. Investing is not a get-rich-quick option; it is a way to grow your money over time, so do your research and be patient.

 

Before you get started on building your investment portfolio (this is just the name used to describe your collection of investments), let’s clear up a few of the basics:

 

What are investments?

 

Investments are something you put money towards in order to get a profitable return. This basically means something you buy that ends up giving you more than it cost in the first place. Most people choose from four main types of investments:

  1. Shares – you buy a stake in a company
  2. Cash – the savings you put in a bank account
  3. Property – you invest in a physical building
  4. Other types of investments can include foreign currency, art and antiques, or commodities like oil, coffee, or gold, for example.

What are returns?

 

Returns are what you earn from your investments. Depending on where you invest, you could get returns in the following forms:

  • Dividends (from shares)
  • Rent (from properties)
  • Interest (from cash deposits)

What are the risks?

There is always a level of risk associated with investments, no matter how secure it may seem.

However, the size of the risk varies depending on where you are investing money. Stock market investments, for example, go up and down continuously and you may run the risk of prices falling at the time you need to sell. To avoid this, make sure you do your homework first.

Property is another type of investment. Many consider this kind of investment more practical and secure, but it’s not risk-free. Should the housing market drop, it may be hard to sell your house and recover the investment made.

Whatever you decide to invest in, make sure you’ve done your research and feel secure with the option you’ve chosen.

The information contained in this article is for information purposes only and does not constitute professional advice.

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