The Basics Of Investing
Investing may seem complicated or complex, but with a basic understanding you’ll be armed with the tools to take control of your future finances.
If you’re looking at saving for the long-term, investing your money could be an efficient and fruitful way to work towards your financial goals.
The best thing about investing is you don’t have to be an expert or know everything to get started. So, let’s explore the basics of investing in 2019.
What Are Investments?
Investments are something put money into or buy to get a return.
The main types of investment include shares, cash ISAs, bonds, property and peer-to-peer lending. There are also more niche investments, such as art or collectables.
When an investor has various means of investing, that is called an investment portfolio. By choosing a variety of investment types (also known as asset classes), the investor lowers the chances of their portfolio performing badly. This is called diversifying.
What Are Returns?
Returns are the profit made on investments.
Depending on the type of investment, the returns can look different. You can receive rent from property, or interest from lending your money. You can earn the difference between how much you invested vs. how much you sell.
With peer-to-peer investments, the return is interest on the money you have lent to borrowers. We offer up to 5% return when you invest through Leap Lending.
Use the investment calculator to understand how different sums of money change the overall return.
Make sure you read and understand the risks when investing with P2P platforms. They are not protected by the FSCS.
What Are The Risks?
With every investment you will take on some risk. But every investment is different.
Often the higher the risk, the better the returns. When choosing the investment opportunities that are best suited to your financial plan, you need to consider your ‘risk appetite’.
Your risk appetite is how much risk you’re willing to take on when you invest. You may feel more comfortable taking on low-risk savings opportunities and earn better returns over time. Perhaps you’re happy to invest into a volatile market and wait out the lows to hit a high.
Diversifying your investments and having a combination of risk within your portfolio means that the overall risk is lowered. If one investment doesn’t perform as well as your presumed, you’ll have others to fall back on.
When Should You Invest?
The answer to when should you invest is simple – as soon as possible!
This is especially if you’re choosing an investment that earns interest. The sooner you start investing, the quicker you start earning interest and then the quicker you earn interest on your interest.
Starting to invest does not have to be complicated. Investing can be as simple as shopping around for better interest rates for your savings. Figure out your financial goals and go from there.
It doesn’t matter how you invest your money, it matters that you start early to either create maximum earning potential or ride out any low-performing investments.
- An investment is where you lend your money or buy a product to earn a return.
- Returns are the profits made on investments, often offered in interest.
- Different investments have different risk levels, which may affect your returns.
- When it comes to investing time is as important as money. Invest as soon as you can.