People choose to invest their money for a wide variety of reasons that usually relate to the desire for financial gain and growth. Not only can investing help you to grow your assets, providing a security blanket for the future, but it can also equip you with a more immediate and steady flow of cash. It can be observed that the reasons people have for investing their cash generally influence the ways in which they choose to invest.
The following article is going to explore the different investment options that exist, alongside their pros and cons
The method or methods of investing that a person chooses will depend on what they expect the outcome to be and how much risk they are prepared to take. As an investor you can have several different goals and expectations with your investments. Whether these are short term or long term will also influence the investment option or options that you choose. Regardless of your eventual aims with investing, it is always a good idea to diversify your assets.
The main investment options to choose from are:
Equities are shares in companies and their monetary worth is dependant on how well the business performs. The financial return on equities is usually either through twice yearly dividends or a lump sum payment once the investor sells these shares. Equity investing in a stable and profitable company is a good, low-risk investment option if you are looking for a steady income from dividends. It is worth remembering that past performance of a company is not always an indicator of their success in the future, and also that not all companies pay dividends to their investors.
Bonds are also known as as fixed interest securities and are sold to investors by companies and governments in order to raise money. Holding a bond entitles you to a regular income in the form of interest from the issuing party. As well as interest, you may financially benefit from capital growth if the value of the bond grows. This is generally a low risk form of investment, however, the bond will sometimes be sold for less than its original value depending on the market.
If you want to invest in and earn money from property then there are two main options available to you. First of all, you can buy a commercial property and then rent it to a business in order to generate a regular income from the rent paid to you. You can also purchase a residential property and generate a rental income in the same way. If the costs of buying a property are out of your reach, then you can always consider a buy-to-let mortgage to help to alleviate your financial restraints.
Pooled funds allow investors to come together in order to buy units in a professionally managed fund. This fund will generally include a variety of investment options, such as equities and bonds. Pooled funds are easy to manage and low-risk due to the diversification of this method.
Investment trusts are similar to pooled funds but are differentiated by the fact they are an equity that is listed on the stock market with a fixed number of shares. Because they are traded within the stock market, investment trusts fluctuate in value according to supply and demand. The unpredictable nature of the stock market can cause investment trusts to be quite risky, but as they often pay dividends they can also often provide a high return.
Equity crowdfunding and loan based crowdfunding are increasingly popular options for investors. Equity crowdfunding involves investing money into a business in exchange for shares in that company, whereas the loan-based option provides the investor with regular interest and a lump sum return on their investment in the future. When you invest in a company via crowdfunding your investment is combined with that of a lot of other people enabling the company to raise the funds it needs. By meeting their financial goal and implementing their business purpose they may be able to increase the likelihood of providing the anticipated returns.
If you can understand the potential benefits of crowdfunding and would like to add this element of diversification to your investment journey, then click here now to sign up as an investor with Go2 Business Loans!
This is peer to peer lending and your investment is at risk. We encourage investors to diversify their portfolio and to review all investments to ensure that they meet with their own investment criteria.