Investing any sum of money is a risky business, especially if you are unsure where to start. It’s tempting to dive straight in before you miss out on any opportunities to maximise your profit. Wait! Before you start investing take a look at these fool proof tips.
Simple Investment Guide for New Entrepreneurs
How to invest a 1,000
If you have a grand in the hand and are thinking of investing it but aren’t too sure where to start, you need to do it wisely so you can get the most from your investment and get more from it than what you started with. To maximise your growth in profit, here are a few timely tips to see what you could achieve:
Stocks & Shares
At the time of writing the FSTE 100 is at an all-time high even though we are going through a triple dip recession. Is this a good time to invest in stocks and shares? Well it depends on how long you want to wait for your return. Most novice advice on investing in shares is to wait as long as you can for your return and you’ll have less risk attached to your investment.
The first big question is: can you risk losing the majority of your investment? What would you think if you opened your first statement and 70% of the investment was gone? If you can live with that you can invest in stocks and shares. Also think that this is a longer time investment that many think – the longer you are willing to wait, the better your odds of making a return.
Spread the load. You can invest in one company, like Apple or BP. But this is high risk, because companies do stupid things, like oil spills or have a bad product launch or the CEO leaves etc. The way to invest in many companies at once is to buy shares in a ‘fund’ and the fund managers will buy many different shares and you buy a share of their investments, supposedly spreading the risk.
You can also spread your money into different funds that are rated High risk, Medium risk and Low risk. So you can further spread your exposure to volatile market swings. Investing in the stock market can be rewarding, but getting some expert advice and choosing a varied mixture of funds is probably the safest way for the novice investor to approach the market.
How to Invest 10,000
If you have a bit more to invest, you might want to look at alternatives to the stock market. Or you might want to add other investments to your stocks with… classic cars. How about a 1972 Alfa Romeo 2000 GTV? A snip at 7,000. Classic cars are exempt from capital gains tax and so can be a wise investment if looked after and kept in mint condition, so a good garage is needed.
Once again, you NEED to do your homework and make sure you get the right car at the right price. Not many people will be on the lookout for a 1996 Ford Fiesta. British made sports cars are a good investment but are difficult to find in the right condition and price. If you have your heart set on buying a classic car its worth joining an owners club to get some inside information. There is a club for nearly every make and model of car – get online and investigate.
Investing in Wine
Wine has outperformed many investments over the past few years including the stock market, classic cars and even Gold! But like all investments there is an element of risk involved and you need to be willing to invest some time into researching the market.
One rule of thumb that has been offered to me was “don’t buy wine you like drinking – drink it”. A bit like any investment, if you get too attached to it you’ll end up keeping it too long or not selling it when the market is right.
Wine, like classic cars, is exempt from capital gains tax and so is an attractive option for investment. In the Up there is an ‘in bond excise system’ which allows you to buy and sell wines that are in bonded warehouses, thus avoiding paying any tax or VAT. In order to take advantage of this unique set up, you really need to know what you are doing. It’s not a quick process, sometimes selling wine can take six months to complete, so be prepared to invest both time and money in wine.
There are some great resources online to help the novice investor get the most out of the wine trade. Both Decanter and Wine Spectator have good articles on the various aspects of investing in wine. There is a lot to learn but the rewards can be high for the savvy investor.
How to invest 50,000
We have covered the stock market, classic cars and wine and you could take your 50,000 and spread it across all three or invest all in one or you could get onto the property ladder.
Investing in Property
Property can outperform the stock market and Gold if you buy at the right price and the right time, the same is true about all investments, so the secret is know the market. Property is liable for capital gains tax and so you can look at these two ways: I need to make a good enough profit including my capital gains tax or I’m never going to sell anything and thus never be liable for capital gains.
Property can give you a monthly dividend through people renting your property, so called ‘buy to let’ or you can buy property that you think is under market value and either sell it quickly or invest in improvements and sell it.
Once again the key is to spend time researching the market and knowing what you should be buying and what will be easy to sell or let. If you have lived in your particular area for a long time you’ll understand the pros and cons and this is great research for what tenants will want to know: how far is the train station? How good are the local schools? Is this a student area? If you are going to rent the house or flat are there plenty of people wanting rental accommodation in your area?
What does 50,000 actually get you? You could buy an entire house in Teesside for £47,500 and rent it out for £395 per month which would give you a yield of 9.80%. Which is better than a savings account but isn’t ground breaking.
There are plenty of yield calculators on the market that can give you these figures. The one above is from Yield Calculator.
You could also use the 50,000 as a deposit, most lenders are now asking for up to 25% deposits on buy to let properties. Which means you’ll have a 200,000 budget to buy a house or flat. There are plenty of resources to find property online and don’t forget about commercial property too, as tenants tent to stay 10 longer than residential tenants to use all the internet searches to find where you can buy a property that rents well for a good yield. London historically has always been a good bet; there are too few homes and plenty of people looking to move to London for work. The key is to find an up and coming area where you can get a property slightly under market value that you can quickly rent out and begin to see a return on your investment. Who ever said this would be easy? Happy hunting!
Hopefully this article has given you some insights into where you can invest a variety of sums. The best advice is to have a mixture of investments, this way you can protect your money form all being lost on one investment.