Okay, so maybe there aren’t millions of ways to invest, but if you’re a beginner it might feel that way. We’re going to get into the basics of a few options open to you, but ultimately an investment broker or financial advisor should be able to help you create a portfolio to suit your specific goals.
There’s a lot to cover, so let’s get right into it!
You’re already a step ahead
You might not know it, but you’re probably investing already! If you’ve got a pension fund, that’s an investment. Your career is an investment too, and so is property if you’re lucky enough to own any.
Let’s talk about Asset Classes...
Stocks, shares, equity
Essentially different names for the same thing. Owning a share literally means you own a small piece of someone’s company, and therefore part of the profits they make. You can buy individual shares, or lots of portions of shares through funds (FYI, a fund is a pool of money that has been set aside for a specific purpose). You can find some great websites that help beginners to start investing in this way. However, we suggest speaking to your financial advisor or broker before starting with investments.
This is the stuff we use to make more stuff. Think gold, platinum, maize, oil, wood or gas. All the basics. You can usually buy these in the same way you would buy shares, and they sometimes behave in the same way too, with the value rising and falling as demand and market factors fluctuate.
Some may consider cash equivalents the safest asset class, but it also provides the lowest return over time. Cash equivalents are investments that are meant for short-term investing; they have high credit quality and are highly liquid meaning they are very easy to buy and sell. Investing in cash means leaving your money in the bank, getting into a money market unit trust, or a money market ETF.
When you invest in a bond, you’re essentially investing in a loan to a company or government that will pay you (the investor) a fixed rate of return over a set time period. These are considered a safer form of investment compared to equities, so if you’re risk-averse, chat to your financial advisor about getting involved.
When you invest in property it’s usually not the house you intend to live in. Investing in property usually means you want to use it to generate income through receiving rent. We’ve got some more advice on turning your property into an investment.
This is one of the newer ways to invest, and one of the more volatile. If you’re going to try it, maybe don’t bet the whole farm. This, perhaps even more so than other investment types, is something you should only be participating in if you understand the ins and outs of cryptocurrency, since it’s one of the least regulated methods of investing. If it’s something you’re interested in learning more about, we suggest you do a lot of reading up to ensure you don’t get scammed.
These include products like Exchange Traded Funds (ETFs), Bonds, Hedge Funds and Unit Trusts, to name a few. Each of these behaves in different ways, and has different benefits that relate to different needs, but they are all essentially groupings of different assets or asset classes. Buying into one of these is an easy way to diversify your investment portfolio. Depending on the product, they could include groupings of shares, or a mix of shares and property, or commodities and cash, among others. The combinations are endless, so it’s a good idea to consult a professional on the best options for you.
What about investment vehicles?
Tax-Free Savings Accounts (TFSAs)
These are great because, as the name suggests, you won’t pay tax on the returns you get (up to a point). There’s also a limit to how much you can invest into a TFSA in your lifetime.
Retirement annuities, endowments and linked-investments also fall under this category.
This is just a basic overview, of course. Use this as a starting point for further research, or use it to guide your questions when you talk to a financial advisor. There are loads of resources available to help you grow your money. Good luck! 💙