Investing your money can be a great way to make extra money. There are lots of things that you can do such as investing in housing, art, antiques, shares and other funds. Choosing which to go for can be difficult but it is worth understanding some of the basics first.
The difference between investments and savings
Many people do not understand the difference between savings and investments. Savings accounts keep your money safe. You will receive interest payments on them, but you will be able to withdraw all of the money that you put in plus the interest. They are low risk and although you may find the value of the money goes down if inflation increases more than interest rates, you will not lose any of the initial capital that you invested in monetary terms. An investment is much more risky. You will use the money to buy something and that item may increase or decrease in value. This means that if you cash it in, you could get back less money than you originally invested. In some cases you may even get nothing back. Therefore you need to take a lot more thought about how to invest your money and make sure that you use money that you can afford to lose.
Reducing the risk of your investments
As investments are risky, it is worth trying to reduce that risk if you want a better chance of getting your money back. Often the best returns are available on the riskiest investments, but you could lose a lot. You need to decide how much risk you are prepared to take and think about whether you would rather take a huge risk and have the possibility of making a large amount or whether you would rather take minimal risk but probably have a lower chance of making so much money. People have different ideas about what they are prepared to risk and how much return they want to get. By researching the available opportunities you will have a better idea of what types of investments there are and which are more risky and then you will be able to take a more calculated approach. It can be wise to work with a financial advisor on this.
Choosing how much to invest
It can be difficult to know how much you should invest. However, it is worth thinking about the fact that you could potentially lose everything that you invest and therefore you should never invest anything that you need. You should only invest spare money that you can afford to lose. You will need to tie the money up for at least five years if not longer in most cases and so it is important to also be aware of that when you are deciding how much to invest.
Making money through your investment
the way that you make money from your investment will depend on the type. You may have some sort of regular return, but you will also hope to make a profit when you sell the investment as well.