As you go through life and keep saving money, you will probably reach a point when you will look at your bank account and start looking for ways to put your savings to good use. Most individuals are usually only concerned with saving money for their retirement, in order to ensure that they will be able to afford anything that they could wish for, during their later years. As the years pass, they make regular deposits, however, they never consider how that money could be actually be put to work.
To this day, the easiest way to increase your savings without actively working for it is to invest the money. Unfortunately, this course of action often comes risks, especially if you do not know what you’re doing. While some financial counsellors and brokers can help you put your money to good use, their services are not particularly affordable. In other words, knowing how to invest your money is one of the most important pieces of information that you can get because it will allow you to increase your savings without having to surrender control over them.
This having been said, here are the most important concepts and practices to keep in mind when it comes to investing your money:
What does it mean to invest money?
The actual act of investing money is essentially a bet. You take a sum of money and give it to a company, for a set number of years. After that time passes, you will either get more or less money than what you invested, based on how the company has evolved.
This may sound complicated and scary, but it is actually relatively safe, especially if you know what you’re doing. The two most important things when it comes to investing money is to never invest more than you can afford and to always make informed decisions. Most online investment platforms offer all the information that you need in order to choose a good company to invest in, you simply have to use it.
How much money should you invest and for how long?
Generally speaking, you should never invest more than you can afford. For example, never invest all of your money in a single place or at once. Instead, decide how much you can lose without any major consequences and invest that amount of money. As for how many companies to invest in, it depends on how many risks you are willing to take. It is usually better to calculate how much money you can afford to lose and to the amount between several companies. This will minimise the risk, so if a company that you invest in goes bankrupt, you will only lose a fraction of what you’ve invested.
When it comes to the duration of an investment, the golden rule is to aim for a minimum of five years. This will ensure that even if a company has one or two rough years, it will still have time to get back on track, resulting in you getting a larger return on your investment.
The main investment routes that you can go down
There are three main ways to invest your money:
- Use a Robo adviser – These are online virtual counsellors that are powered by AI technology. They are tasked with going through thousands of permutations in order to find the best possible investment options for your money. The fees that most Robo advisers charge are usually under 1% of the total value of the investment;
- Pay for the services of a financial adviser – This is one of the more expensive ways to invest money, but also the most effective. You essentially pay a trained professional to create an investment portfolio and to manage your investments for you. The adviser will handle all the technical aspects and will look for the best possible investment opportunities. However, the charges that these individuals ask for are often large and you must pay them upfront;
- Buy stocks/shares – Stocks, also called shares, are ownership units of companies that you can buy. The goal here is to look for public companies that you think will grow and to buy shares while they are at a low price. Once the value of the company grows, so will the price of the shares, which means that you will be able to sell them for a considerable profit;
When it comes to investing money, half of the battle is knowing what your options are and which is the best one for you. Research before investing your money and always think of this process in the long run.