Investment Options Available To A Beginner

So last month I was refreshing my knowledge about all the different types and options of investments and some of them specifically to where I live (UK). And I’ve created another cheat sheet – this time about all the different types of investments that I could find on Money Advice Service. I’ve added it to the end of this post, so keep reading!

And in this post I would like to set the fundamentals. All investment options are divided into categories, otherwise known as ‘asset classes’. I’ll go through each one of them and show you what are all the different paths you can take when investing your money.

If you’re not sure why you would want to invest, read this post here.

Cash

What can be more reliable than your own savings account? Saving cash in your bank or building society is one of the ways you can invest. It is the easiest, most flexible investment option and usually has quite an instant access to your money. If you want to make a cash investment, look out for:

  • Cash ISA
  • Junior ISA
  • Stocks and Shares ISA
  • Peer to Peer (P2P)

Shares

You have an option to literally own a piece of any company that is listed on the Stock Exchange. Your options here would be limited by your risk appetite and your budget.

If you’re buying your own shares, you can use one of the apps or websites for it. Check out an article about this on The Balance. But generally, it’s a good idea if you know into what kind of business you’ll be investing into. These could be:

  • Multi-national companies
  • For-profit small businesses
  • Non-for-profit businesses (these are also called community shares)

And if you’re buying on your own, make sure you’re very clear on the fact that you might be locking up your money for at least 5 years. And because of that, if you’re investing to get great results, please be careful in what you’re investing your money into. Community shares will probably not bring you as good of a result as shares in some well-established company.

But you also don’t need to do it alone – you can pool your money together with other people in funds such as these:

  • Unit Trusts
  • Open-Ended Investment Companies (OEICs)
  • With-profits funds
  • Venture Capital Trusts
  • Investment Trusts
  • Tracker Funds and Exchange Traded Funds

Property

A beginner can be anyone and that includes people with enough money to invest into real property. You can invest money into buying properties and renting them out, which is otherwise known as ‘buy-to-let property investment’. But you also can rent out your own house if you’re moving. The rule of thumb here is that you as a landlord cannot live in the residence that is being rented.

Here are a couple of websites you can source your property from:

Although keep in mind that starting from this year (2020) all landlords will not be able to claim any tax reliefs on their income anymore. This can make it more difficult to make profit.

Fixed Interest Securities

While you need to pay interest on borrowing money from lenders, you can become a lender yourself. Fixed interest securities are loans to companies or governemnets (bonds), on which you’re paid a fixed interest as a compensation for using your money. Be aware that time of maturity of some of these investment products can be quite lengthy. Here are a couple of them you want to look for if you want to invest you money this way:

  • Investment bonds
  • Endowment policies

On the website Positive Weath Creation, they mention that as much as investing into such authoritive and seemingly reliable bodies such as big companies and the government can be very secure, there is still a change of you looking your money. I would say that you ask yourself these questions before getting into fixed interst security investment:

Is inflation going to raise in the next 1 to 5 years?

Will the interest rate raise in the next 1 to 5 years?

How long has there not been a recession? (If there wasn’t one n a long time, the chances are – there will one soon.)

Contracts For Difference

Contracts for difference are your predictions against the reality, e.g. you predicted oil will rise and it did – well done you got yourself a profit. There are a ceveral items growth of whcih you can be predicting, those include:

  • Foreign Currency
  • Collectables
  • Commodities

As a beginer, you want to really educate yourself on these ones, otherwise it will be difficult to make any kind of profit. Also it can be more difficult while you’re investing smaller ammounts. But, investing small can help you not to loose too much. Be very careful with these as they are very risky.

Disclaimer

I am not a financial planner and do not provide any advise about which option you should best chose. I’m here to provide you with the options to choose from. And I highly recommend to talk to a financial planner or adviser if you’re planning to invest relatively big amounts of money.


Thank you for reading this post, I’ll be back to you with more money wisdom’s for artists tomorrow!

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A little bit more information about all the different types of investments and how to differentiate them.

types of investment cheat sheet

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