Best Ways To Invest Money
Have you been saving for some time? Do you have a lump sum of money you want to invest but just aren’t sure how or where? Read on as I introduce you to the best ways to invest money, or at least the most popular ways. From pensions to stocks and shares, and everything in-between, find out how you should be investing your hard-earned pennies!
Why do I need to invest my money?
In order to get the most out of your investments, you need to be in it for the long haul. They aren’t a way to get rich quick, they take time and more importantly research. The main reason why people decide to invest their money is for long-term financial security and most obviously, to build their wealth. Before deciding to invest, it’s important to consider what your goals are. This will allow you to choose the best place to save money for you.
Just remember that in addition to any investments you make, you should always ensure that you have some savings to fall back on. Not all investments equal money and each one comes with its own risk as I’ll explain below, so just be sure to have some savings tucked away for safekeeping!
What should I consider when thinking of investing?
There’s no one-size-fits-all approach when it comes to investing, nor is there necessarily a best way to invest money. How you choose to pursue your investments will depend entirely on your financial situation. You must think about what your investment horizon may look like and whether you’ll need access to your money. It’s also important to consider what your financial goals are, both in the short and long term.
One of the most vital things to think about before you start investing is risk. As I mentioned above, investing money in the UK doesn’t always provide guaranteed returns, so it’s good to understand the risk involved (that you might lose money) and, equally importantly, to understand the amount of risk you’re comfortable taking, to try and maximise returns on your investments. Lastly, investing isn’t for everyone, particularly if you’re more risk-averse, as no matter where you invest your money, it will always be subject to unpredictable rises and falls.
It goes without saying that there are other places to invest your money without taking such a big risk, so if you are more prone to risk you might want to consider safer options such as traditional savings accounts.
What are the best ways to invest money?
As mentioned, there aren’t necessarily any best ways to invest money, as it’s fully down to your personal needs, your own appetite for risk, and your reasons for investing. However, some of the most popular and best ways to invest money in the UK are the following:
1. Build your retirement savings
You can never start investing in your pension too early and this is truly one of the best ways to invest money as it ensures you’re comfortable in retirement. However, it does of course rely on your circumstances and current financial plans, but if you do have the means, I’d definitely recommend doing this.
Investing or saving into a pension also comes with a number of tax benefits. Depending on your income, it could boost the value of your retirement fund by up to 50%!
You might already have a workplace pension, but you could also consider a Self-Invested Personal Pension (SIPP), which gives you a more eclectic range of investment options.
2. Stocks and shares
You don’t have to be working on Wall Street to successfully invest in stocks and shares. This particular investment option allows you to set up your own portfolio of shares which are in short, ‘bits’ of a company that are sold to raise capital.
Share dealing allows investors to buy and sell shares in publicly listed companies using a stocks and shares account. You deal in individual companies' stocks directly.
To achieve any kind of financial success, you must buy shares when their price is low and then sell them on when they are worth more. The company sets the initial price, but then it is affected day by day by other factors such as the company’s performance and the economy.
However, there are absolutely no guarantees. While you have more control over your money, it can also be a much riskier investment compared to the other investment methods I’ve listed below. So be sure you know exactly what you're doing before you start.
3. Asset investments
Investing in precious metals such as gold, platinum, or silver, or in antiques, art or fine wines is increasingly popular and while it may be one of the best ways to invest money, it doesn’t come without a certain amount of risk.
The value of these types of investments is known to fluctuate quickly, meaning you’re at risk of seeing your assets soar and then fall in value in a short period of time.
4. Investing in property
There can be a huge number of advantages to this and it is definitely one of the most popular and best ways to invest money. For example, you could rent a property out to earn an income or perhaps renovate properties and sell them on for a profit.
It does require you to have a certain amount of cash so you can buy the property outright, so it isn’t always accessible to everyone unless you can get a buy-to-let mortgage. This would add extra costs to your property venture.
It is also worth remembering that if you rent out a property, you’re taking on board the responsibilities and expenses of becoming a landlord. This could end up costing you more than you might expect.
5. Savings accounts
This is one of the best ways to invest money as they are generally very low-risk. If you’re sitting on a lump sum of money, you might want to consider investing your money in notice accounts or perhaps fixed-rate bonds. The former provides the flexibility of being able to access your money after a set notice period and usually offer competitive variable interest rates. Fixed-rate bonds on the other hand allow you to lock your money away for a set time at a rate that won’t change until your account matures. This makes them a great option in times of uncertainty and falling interest rates, as they all but guarantee your return!
6. Cash ISAs
Cash ISAs, also known as Individual Savings Accounts, are very similar to traditional savings accounts, but provide the benefit of tax-free savings! It is worth noting that they do also have an annual limit of £20,000 on your deposits. There are three types of Cash ISAs available to you depending on your investment needs:
An instant access cash ISA allows you to deposit and withdraw money at any time without incurring any fees, although this might be limited by your ISA provider so do check first.
Regular savings ISAs usually offer a fixed rate of interest so long as you deposit an agreed amount each month.
With fixed-rate cash ISAs, you are able to lock your money away for a set period of time and in return get a competitive interest rate. You’ll usually find that the longer the term, the higher the interest rate.
7. Children’s savings accounts
This is one of the best ways to invest money if you have children. Children’s savings accounts allow you to make an investment on behalf of your children which in turn puts them on a path to financial security, and who doesn't want that for their children?! It also helps them to understand how to save and the importance of saving. Generally speaking, this type of savings account offers more competitive interest rates than adult savings accounts, so they can be a fantastic investment in your child’s future.
8. Lifetime ISAs
A Lifetime ISA is a type of savings account designed for people over the age of 18 and under the age of 40. The idea is to help you either buy your first home or save for retirement. You can only save up to £4,000 per financial year in a Lifetime ISA. However, the government will then add 25% to your savings up to £1,000 per year until you’re 50.
Speak to an IFA
If you’re unsure which of the above options are the best ways to invest money for you and your circumstances, speak to an Independent Financial Advisor (IFA).
They will examine your finances in detail and then recommend a selection of investment options that are well-suited to your goals and circumstances.
