Mr. Dan6/16/2020 11:26:00 pm
Put your cash in the bank
Seemingly a safe option as you know exactly what you’ve got, but cash itself isn’t a great investment – especially given the pitifully low rates of interest paid by banks and building societies. Interest rates are rarely higher than inflation, which means your money is actually losing value all the time.
If you have zero appetite for risk or are deliberating a longer-term plan, by all means, put it in a savings account (opt for atax-free cash ISA) to get some interest. Fixing for three or five years will give you the highest interest rates, but bear in mind you won’t be able to access it for the period, plus, you could lose out if interest rates improve.
Whatever you do, just don’t keep your cash under the mattress. Thanks to inflation, it’s losing you the most money there – andif you get burgledyou could lose the lot!
Invest in antiques, art, wines and collectables
Credit: BBC
Investing in collectablesbrings in no immediate income, and depends entirely on someone paying you more than the items cost you. There's also the added proviso that fashions come and go, so what is highly desirable today may be passé next year.
You need to be an expert in whatever it is you’re collecting, otherwise, you’ll be taken for a ride by those who know what they’re doing.Buying and selling onlineis typically cheaper than using old-fashioned auction houses and gives you a much wider global marketplace.
A good starter strategy is to source desirable items where there are fewer target buyers (such asonline classifieds website Gumtreeor a car boot sale) and selling them where the demand is highest (such asonline auctioneering giant eBayor a club).
Beware of falling in love with the items you collect – that turns the exercise into an expensive hobby rather than an investment!
Put your money into property
Credit: Channel 4
Historically the value of housing rises faster than inflation, and one day you will clear the mortgage. Rents rise year by year and you will always need somewhere to live.
Once you’re on the property ladder you can climb up to more expensive properties as your income improves. As an investor, you can go one step further with buy-to-let, owning property that produces income as well as increasing in value.
The big disadvantages are that you need to commit large amounts of money to each investment, and it can be time-consuming keeping an eye on the property and the tenants. Make sure you set aside some money to cover hefty maintenance bills (which crop up whether you can afford them or not!).
Look into bonds
Governments and companies borrow money and issue IOUs. Those issued by the UK government are known asgiltsbecause the certificates used to have gold leaf around the edges to reassure investors how safe they were. You canpurchase gilts(directly or as part of a fund) as well as equities through a broker.
They carry a guaranteed interest rate and – usually – a date on which they will be redeemed, with the borrower buying them back at full price, known as the nominal or par value.
Theyieldon the bonds (the amount of interest you get each year for every £100 invested) will reflect how safe or risky the investment is seen to be by investors. The safer the debt (the less likely the borrower is to renege on its debts), the lower the yield.
Bonds issued by governments are known as sovereign debt and are generally regarded as safer than company debt because governments are less likely to go bust than companies (however, bear in mind that Argentina defaulted on its debts back in 2005 and Greece has been struggling to honour its obligations more recently).
Unlikefixed-term savings accounts, you can sell your bonds at any time – but the complication with bonds is that you don't pay 100p in the pound to buy them. They trade at the market value – the price that investors are willing to pay.
At times of low-interest rates, the price of bonds will rise, thus reducing the annual amount you receive for each £100 you invest. When interest rates rise, the market value of bonds falls.
Stocks, shares and equities
Credit: Paramount Pictures
Shareholders also sometimes getdividends(a payout from profits), usually twice a year although a few large companies pay four times.
Like buy-to-let property, shares provide the potential for your invested sum to grow, plus income, because shares in growing companies increase in value and provide increasing dividends. But with equities, you can invest much smaller amounts at a time and they’re much cheaper to hold.
If you’re nervous and don’t have a lot to invest you can put your money into a fund such as a unit trust or an investment trust, which pools your cash with that of other investors to invest in shares on your behalf. You have a manager doing your investment for you, so it takes away the worry.
