Did you know, aside from the gender pay gap, men have more investments than women, on average?
You already know what business you want to run. I do, too. However, I’ve always been a great believer in looking at money holistically, and completely separate from what I enjoy doing. And if you’re good at what you do, there will come a time in your life when you might have a little saved up. A nest egg.
Unlike a real egg, the worst thing you can do to savings is to just sit on them. Instead of an egg, which will grow into a chicken, imagine your savings are a tomato. The longer you sit on a tomato, the older, moldier and more squashed it will become.
That’s what will happen to your savings if you don’t invest them sensibly.
DISCLAIMER: I am not a certified financial adviser, I am just someone who used to work in the stocks and shares department of a major bank. The training helped me understand this: Do not invest your money on the say-so of any random person or website. Invest it based on your own common sense, a good understanding that the value of investments can go up or down, and most of all, if you have a lot of money you should hire an IFA (independent financial adviser) to help you work out where to put it.
Okay. That being said, I personally think it’s worth looking at stocks and shares investments. There are numerous ways you can do this in the UK. You can invest in a stocks and shares ISA. You could sign up for an account on etoro.com. Or you could put your money into an annuity fund, income drawdown scheme or other investment plan. The stocks and shares ISA is offered by most banks as a tax-free way of growing your savings. Like a cash ISA, you put your money into it every month for best results. Unlike a cash ISA, where the bank pays you interest, no one gives you interest on a stocks and shares ISA.
So how does it make money?
Basically, the money you put into your stocks and shares ISA is then invested for you into companies on the stock market. With most stocks and shares ISAs, you can choose where your money is invested, although some only offer “groupings” of companies, organised according to risk.
If you don’t want to risk losing any of your initial investment, you would opt for low-risk stock options. Well-established companies with modest profit margins but which are unlikely to lose value.
If you were okay with a little bit of risk, you would opt for medium-risk stock options. These would include some newer companies but usually in “safe” industries such as raw materials, and in “safe” markets such as Europe or North America.
If you don’t mind the prospect of losing money, you can opt for high-risk stock options. These would give you the potential for the very best financial gains, but the downside is they could lose money as fast as they make it.
The other way is to invest directly in the stock market yourself, choosing each company in your portfolio individually. You might choose a couple of low-risk options, one or two medium ones, and a couple of higher risk ones. Or you might like to spread your portfolio across as many companies as possible on the stock market! The logic here is that some of these investments WILL lose money. But if you’ve got your picks right, these will be offset by the gains from other investments (which is also how the stocks and shares ISA calculates your investment profit).
You don’t need to stop there. With sites like etoro, you can also invest in cryptocurrencies. These are very, very volatile and are as likely to go down as they are to go up. They are highly sensitive to news stories about them, and there are a lot of them, these days, all with different ethos and underlying technology. This is a whole ‘nother area of investing you might like to research.
Research is key.
Don’t just throw money at shares in a company because you like the sound of its name or because you like their brand. Detach. You don’t need to like the brand to see when they are a sound investment.
The moment you invest in stocks and shares, your investment’s value will drop. This is because of the difference between the buy price and sell price. For most people, the best investment strategy is to invest, then leave that money invested until it makes a profit. However, you should always take independent financial advice when it comes to money. You can find an IFA in your area by searching “IFA (your town name)” Only 21% of women keep their investments in stocks compared to 59% of men. It’s another way men have more money than us. Educate yourself, take good advice, don’t feel pressured to invest in a company if you’re worried it’s a bad option, and overall, don’t be afraid to invest in the stock market.