Many people think that investing in the stock market involves too many risks. That is why most stick to safer investments such as ISA’s and other interest paying accounts. That’s a reasonable attitude because the last thing anyone wants is for hard earned money to be lost completely or reduced in value if the stock market takes a dive. It is possible though to build up a portfolio of shares over the long term that will reward you handsomely when they come to be sold in 10, 15 or 20 years time.
Putting the bulk of your money into a safe tax-efficient savings account with your bank, even though the interest rates are currently very low, is a sensible move; however, for money that you have to spare it’s worth considering developing an investment portfolio. If you don’t have any previous experience of investing, conduct plenty of research by exploring online and reading the financial sections of quality newspapers.
Taking advice
Before you start building your portfolio, and especially if you’re unsure about how to do it as risk free as possible, it’s sensible to take advice from a seasoned professional who understands the investment world and can help guide you to investments that you feel comfortable with.
The best approach is to start in a small way and then gradually build up your range of investments. The key here is not to put all your eggs into one basket. For example, if a company whose stocks you want to invest in has shown excellent returns over a number of years circumstances in the wider economy could knock it off track. That is why it is important to spread the risk by investing in a range of sectors. It is better to have a high number of smaller diverse investments than one large one.
Financial advisors will help you develop a portfolio of investments with a degree of risk that you are comfortable with. Experienced and successful investors such as Najib Mikati, who is a former Lebanese Prime Minister and co-founder of the M1 Group, demonstrate that there is no substitute for having a recognised background in the investment business. The M1 Group has interests worldwide and especially in the Middle East and Africa, investing in sectors such as aviation, construction, retail, real estate and energy.
When you take professional advice, you need to fully understand what you are being advised about and why, so it’s essential that as previously mentioned you take the time to research the investment world and find out what your investment options are.
Types of investments
Buying shares in a company means that when that company does well and posts good profits, you as a shareholder will receive a dividend that may well be much more in percentage terms for your investment than you would get from a savings account. If the company doesn’t do well, then you could lose out, but that’s the nature of investing. You have to decide what level of risk you want and then search out suitable companies.
You could invest some equity in a local business, especially if it’s doing well and has potential for expansion, or you could look to investing in real estate on a buy to let basis. There are also unit and investment trusts managed by experts that are certainly worth considering as investment vehicles.
Whatever you decide, do your research, take advice, and start to develop a portfolio that will grow and continue growing.
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