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Putting your spare money into saving accounts like cash ISAs can be a fairly depressing business these days. Thanks to a decade of low interest rates, and no prospect of change on the horizon, you barely see any growth in what you put aside for a rainy day.
If you are determined to get your money working for you to generate extra wealth, then investing is the way to go. But unlike opening an ISA, buying into assets like stocks, bonds and mutual funds, and moreover achieving the results you want, is a much more complex business that requires time, knowledge and professional guidance along the way.
Done right, investing can turn those savings that are sat idly in a savings account somewhere into the wealth you need to realise your dreams. But it is something you should only go into with your eyes wide open. Here are some basics every beginner needs to know.
Investing is risky
There is no sure thing in the world of investing. When you buy stocks or shares, you are basically betting on that company, organisation or market to grow over time, making your stake more valuable. But things can and do go wrong.
The basic rules of investing are that you always have to balance risk with potential returns. Certain highly volatile markets can, if you are lucky, see your make big gains quickly, but at the same time, you could lose everything.
On the other hand, index-linked investment funds, of the kind that most pension schemes are built around, opt for slow, steady progress over long periods. You might not see your wealth grow all that significantly, but there’s little chance of losing the lot.
Investing is a long-term commitment
Unless you are prepared to see a significant chunk of your life’s savings just disappear by taking a gamble on some high gain, high risk venture, there is little point looking at investment as a means of short-term wealth creation.
If you want to protect what you have as a bare minimum, if you want to play the percentages, then you have to go into investing for the long haul. That means looking at your financial goals 20, 30 years down the line, and also making sure that you won’t need the money you are investing for other things in the meantime.
Investing is a personal journey
There is no right or wrong way to invest, no off-the-shelf solution that will help you achieve your financial goals. It very much depends on your circumstances, your ambitions, even your personality (just how risk-averse are you?)
And it is not a case of deciding these things at the start of your investment journey, then pressing play and waiting. Things change over time, our circumstances change, we change, and your financial plans should always be adaptable.
For award-winning financial planning advice, get in touch with Fiducia Wealth.
This is a collaborative post with Fiducia Wealth.