Investments can be a highly effective way to generate wealth but knowing what to invest in is critical to your success. There are endless options for investing, from savings accounts and stocks and shares to gold, diamonds, and cryptocurrency, but they don’t all offer the same rate of returns or level of risk. Remember, your needs may change, so it is essential to understand both the return on investment and any potential risks involved when investing your money.
But which investment is right for you?
Here, we look at some of the most popular forms of investing and examine their pros and cons in relation to property investments.
While opening a savings account with a regulated and insured provider can be a low-risk way to invest your funds and give you easy access to your money, these investments tend to come at a cost – with a low rate of interest many savings accounts offer, generating a low yield.
The best easy-access savings account currently offers an AER of just 1.5%. So, if you put £5,000 in a savings account for 12 months, with an interest rate of 1.5%, you’ll generate just £75.52 over a year!
While there are ways to access a higher savings interest rate, such as tying your money up in a fixed account for three or five years, you’ll still only benefit from a relatively low-interest rate of 2-3%.
Stocks and shares are seen as a first-choice investment for people who want to make a lot of money, but, in reality, more people lose money on the stock markets than those who generate a return. Around 90% of people lose money on the stock market, which highlights how volatile this type of investing is.
There are various ways you can invest in stocks and shares. From buying stock in a single company to index tracker funds, you’ll need to do a considerable amount of research to determine which investments are most suited to your circumstances and goals.
However, stocks and shares are generally recognised as volatile and high-risk investments. With the potential for company values and entire markets to be decimated overnight, the risk of instantly losing all of your cash is extremely real.
People tend to invest in gold, diamonds, and valuables in two ways.
Furthermore, you’ll need to ensure that you have access to appropriate security arrangements if you intend to purchase high-value items and factor the cost of this security into your investment strategy. Similarly, ensuring your high-value items may come at a costly expense to your overall investment. For example, the cost to insure a $10,000 watch may set you back £100-$200 per year, or up to £163.00.
There have been endless stories about cryptocurrency in the press, and we expect to see even more throughout 2022 and 2023. As crypto is a form of decentralised currency, meaning it is bank free and unregulated, it has been one of the most ground-breaking investments to hit the mainstream in recent years. However, it hasn’t always been plain sailing for investors.
While market highs have enabled some people to profit from cryptocurrency, a high-profile crash in 2018 saw 80% of the value of the market obliterated. To date, cryptocurrency has exhibited ‘boom and bust cycles, with even the most popular cryptocurrencies succumbing to drastic drops in value.
For today’s investors, crypto might seem like a fun and attractive way to build wealth, but the volatility of the market, combined with security concerns, means that only the most risk-tolerant investors should consider this type of venture.
Although property is considered an ‘alternative investment’, it has shown remarkable stability compared to other types of alternative investments over the years. While the market has inevitably dipped at times, the value of property has broadly increased over the decades.
Even though the property market cannot guarantee returns, most investors agree that if you can hold on to your property for long enough, it will increase in value. Significant capital growth can be achieved by riding out temporary falls in the market and selling property when the market is at a high. From 2022 – 2026, for example, the value of UK residential property is expected to grow by 13.1%, which highlights just how lucrative investing in the property market can be.
However, this isn’t the only way to invest in property. It’s the variation in property investments that is, perhaps, one of the market’s most significant advantages. From buy-to-lets and commercial premises to serviced accommodation and rent-to-rent agreements, there are numerous ways to generate short-term revenue and long-term wealth from bricks and mortar.
By leveraging your current financial situation with your wealth goals and factoring in lifestyle trends, you can successfully implement investment strategies that enable you to profit from the property market. After all, everyone needs housing, and businesses always require premises. While the way we purchase, rent, or use property may change over time, the fact that it’s a basic necessity means that there will always be some demand for property.
No one can tell you what the ‘best investment’ is, as it depends on your financial circumstances, investment goals, and level of risk tolerance. However, there is a reason that putting your money in property is seen as being as ‘safe as houses.
Of course, knowing how to invest in property successfully is key to generating high returns and expanding your portfolio. At Redmayne Smith, we believe that property is key to building wealth and, more specifically, off-plan and completed developments.
Click here to view our current investment opportunities to discover how you can generate the maximum return on your investment.