There are more people than ever investing these days, which could be attributed to the pandemic along with the rising cost of living in the UK. Investing can be a great option for anyone and people of all ages, but it can also be a daunting area to get started with particularly if you do not know what your options are. You must always know what you are investing in and understand the risks of doing so.
Why Invest?
First, it is worth looking at why investing is popular. Investing can be a way to earn a passive income stream, to build for the future/retirement or simply as an alternative to leaving savings in a savings account. With interest rates so low and inflation so high, people need to be smart with their money and savings accounts offer very little right now so investing could be a good alternative (although keep in mind that it can be harder to access your money).
What Should I Invest in?
There are many different options when it comes to investing. You should know what these options are and consider what your short and long term goals are along with your appetite to risk. Here are a few of the main categories of investments:
Stocks: Stocks are an ownership share in a company, which allows you to grow your wealth when these stocks increase in value (you may also be paid dividends). These can be a great way to build wealth but there is risk as the value can rise and fall depending on various different factors.
Bonds: The risk with stocks is that they are volatile, which is why many balance stock investments with bonds. Bonds are loans to companies and governments and are considered to be more stable.
Indices: Indices are baskets of assets that can be traded. Typically, people will trade indices as a way to gain exposure to global stock markets, such as the S&P500 or Nasdaq 100. Investing in indices trading is a less risky investment as the value of the index is less affected by the volatility of a single business stock but all the businesses on average.
Gold: Gold is seen as a safe bet and a way for investors to hold the value of their money and hedge against inflation.
Cryptocurrency: Many state that cryptocurrency will be the gold of the digital age despite its current volatility. There are many cryptocurrencies to consider, including Bitcoin which recently reached an all-time high. It is important to do your research and only ever invest in something that you understand.
As you can see, there are lots of options for investing and ways to build your wealth, but you must always do your research and understand the risk
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