What is investing?
The Cambridge dictionary defines investing as the following:
“To put money, effort, time, etc. into something to make a profit or get an advantage.”
Investing is a way of exchanging something in return for a reward of some kind. There are many different ways to invest, but these are some of the most common.
Real estate investments
Buying a property that goes up in value during your ownership is a great investment, and can be done on many different scales. For example, some people will purchase a property purely to live in, and if it eventually makes them a profit then that’s just a happy accident. Others may buy what you call an investment property with the sole purpose of making a profit.
Investing in stocks
Stocks are another very popular investment type. Buying stocks means buying a minuscule percentage of a profitable company that (hopefully) becomes more valuable over time.
Investing in currency or materials
Cryptocurrency is growing in popularity very quickly and is a sought-after investment type in 2021. Check out this article to learn more.
A more traditional way to invest is through precious materials such as gold, platinum, and silver, which all come with their own pros and cons.
Starting your own business is an investment with a huge possibility for both return and loss. While many businesses fail, some people manage to trade their time, skills, and efforts for a very lucrative return. One of the best parts of investing in your own ideas and business is that you’re largely in control of your success, instead of leaving it up to market trends or other people’s decisions.
Find out if this is a good option for you here.
One of the best investments of all. Investing in your own knowledge and experience can pay you back very highly. Whether you use those learnings to make better financial choices, score a great job or start a business of your own, you never regret betting on yourself.
How do you know if you’re ready to invest?
Most financial experts agree that you should never invest any money that you cannot live without. Of course, the plan is for your investments to make you money, not lose it, but due to the nature of the game, you should never invest anything you’re relying on to survive.
You should also pay off any high-interest debt before putting money into an investment, so that you can start with a clean sheet.
However, compound interest means the earlier you start investing, the better your financial future will look. So if you can do so safely, start today.
When in doubt, make sure you do your own research and get proper financial advice. Remember, it’s never too early to begin investing in yourself. If you’re not quite ready to start investing your money, then take this time to invest in your skills, mindset, and health instead. Those investments will always pay back dividends.
What to consider when choosing where to invest?
- How high risk you are. Everybody has a different tolerance to risk. Your lifestyle, existing assets, family setup, job security, and personality will all play a part and affect how much of a gamble you’re willing to take.
- How quickly do you need to access the money? Different investments vary in how easy they are to access in an emergency or short notice. If you don’t need immediate access to your investment you will have more options.
- What are your long-term goals? Some investment strategies rely on their longevity and can lose you a lot of money if you don’t have the time to wait them out. So consider your short and long-term goals carefully before choosing where to invest.
The pros and cons of investing
There are a lot of pros to investing, and most people would say that when done right it’s common sense to invest your extra money. However, that doesn’t mean there are not some cons to carefully think about before making any decisions.
- Your money can grow and multiply instead of slowly depleting in a savings account. By taking an active interest in your finances and making them work for you, you can increase your wealth in your sleep.
- Your investment today could care for your family and even provide for future generations. That’s a great feeling.
- It’s never been easier, today anybody with a little spare cash can start investing even without leaving the house.
- There is always a risk. Some investment strategies are a lot riskier than others, but even the safest options have the potential to go wrong. Nobody can predict the future, and there’s always a chance that you lose more than you earn on your investment.
- Some strategies are very long-term. This can be frustrating as you may need the money now and it’s tied up in an investment that you cannot or shouldn’t access for a long time. There is even a risk that by the time your investment pays off, you won’t be here to enjoy it. However, bear in mind that this risk is fairly small compared to the risk of not investing and reaching old age without the funds to care for yourself.