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There’s often a bit of an incorrect perception when you mention ‘investment’ to people. There’s an impression that the word is reserved for business moguls who are putting capital into new businesses – or even cash rich individuals who are exchanging money for commodities and ‘playing the market’.
The reality is very different. Everyone’s likely to invest at some point in their life – it’s just that we don’t consider buying a house or opening a savings account to be an investment.
We’ll run you through the most popular kinds of investment, explain what’s involved and help you work out which, if any, is right for you.
What is an investment?
At its most basic level, the term ‘investment’ is something you put your money into to get an increased return. They typically come in one of four types with varying levels of risk:
Cash – By placing your money into a bank or building society account you’re actually investing it – behind the scenes, the bank using the money they have to invest further – they make a large return and offer you some of their profit in the way of interest. This is considered a low risk investment.
Property – Although it might not be the primary reason for the purchase, when you buy property you’re investing in the bricks, mortar and land – with the likelihood that it will be worth more than you paid when it’s sold on. There are a lot of variables, not least with the country’s economy – but property is generally considered a safe investment if bought properly.
Shares – Buying a stake in a company is normally done with the belief that the company will grow in size and value, thus making the share you hold worth more than the moment it was purchased. Markets and company performance are extremely unpredictable – and trading in shares is therefore considered a high-risk investment.
Securities/bonds – Buying bonds or securities is a little like loaning your money to a company or government with an ‘IOU’ note in return. The time period and value/return is set in advance – with your money and interest being returned at this stage. Securities and bonds are generally considered much lower risk than trading in shares.
There’s plenty of great information already available online about saving, savings accounts and purchasing property – so we’ll concentrate on trading in stocks; what most people consider to be the real meaning of investing.
Before we continue, it’s really important to understand what this kind of investment is: It’s essentially gambling – you’re placing your money with the hope that the investment returns a greater amount – but, it’s just as possible that money invested will return nothing at all. You should not invest money that you cannot afford to lose.
Even billionaire investors agree that the stock-market trading floors you see in movies aren’t an accurate representation of investing in real life – the truth is frankly more boring, carefully selecting an attractive company, buying shares and then, well… waiting.
When you’re done with waiting, the advice is usually to wait to some more. Although in the short-term shares might fluctuate, they’re unlikely to deviate massively, which means holding on to them for years is often the way to see a reasonable amount of growth.
The stock market
Although the intricacies are much more complex, a stock market is a place where buyers and sellers exchange shares. Companies release these shares to build the amount of capital they have to develop their business. So, you buy a share and you become a shareholder – albeit a very small one.
Although the share information you see on the financial news only covers the large or significantly newsworthy companies and share values, you can check a company’s share price at any time.
There are lots of factors that will dictate the value of the share; the country’s general economic state, the company’s financial performance and the behaviour of other shareholders all contribute to the ‘sentiment’ of the market – the overall attitude toward the shares and therefore, the desirability and the price.
Making a profit
No one can tell you how much you’ll make or lose when you’re investing. Some of the most complex computer code ever written is made for predicting upward trends in share prices – and even that won’t perform all the time.
Once again, it’s important to remember that money invested in shares is a gamble – maybe you’ll make a fortune, maybe you’ll lose a fortune. Risking more than you can afford to lose is an easy way to end up with unmanageable debt. You can find out about more about debt management strategies online elsewhere. Even an investment in a company that’s performed well for years doesn’t predict that share’s performance tomorrow, so be careful.
Shares tend to deviate in price just a few percent in the short term – whereas they’ll typically increase or decrease more significantly over 5 or 10 years.
Experts will generally tell prospective investors to invest widely – thus mitigating the risk of one company or industry performing poorly. Monitoring a share or share portfolio is also important, the risk that relates to shares changes with the market – and you should only continue on a basis you’re happy with.
What’s right for you?
For most people, starting with an ISA is a good place to invest. While interest rates might not look amazing when compared to the returns you could get with some well bought shares, there are a couple of things you can be certain about.
Firstly, money that is invested in an ISA is tax exempt – which isn’t the case for the profitable return on shares. Although an ISA’s interest rate might be low, the big tax saving often makes up for it.
Secondly, an ISA is about as safe an investment as you’re ever going to find – so if the idea of risk is a scary one, an ISA means you can sleep soundly.
If you’re going to explore stocks and shares – remember to only ever invest what you can afford to lose, oh, and be very wary of ‘sure things’ that you might hear people talking about or have recommended to you – there’s no such thing as certainty in trading – if there were, we’d all be millionaires!
Nowadays, there is more and more pressure to stay in work, and with money becoming tight, an easy retirement can seem like a pipe dream. However, it’s important that we approach retirement in the right way. While it may seem complicated, a few simple processes can have you on the right path to early retirement.
Don’t Rush into Retirement
While there are many who have reaped the benefits of an early retirement, there are just as many who felt they may have retired too soon. Retirement can take a lot of readjustment, so if it’s possible, it’s best we ease ourselves into retirement.
For example, if you have recently paid off your mortgage, then you will be in apposition to switch over to part-time work. This gives you the best of both world before making a final decision.
Save As Soon As Possible
This may seem obvious, but the sooner we are able to start saving, the sooner we can retire. While we shouldn’t look to work ourselves into the ground, it does mean that we should treat our money with care. It can also mean making decisions that could change circumstanced in our current situation.
If you are due a pay rise, you could request that the additional funds are placed in your pension fund. Not only does this allow you to save for your future, but is also more cost-effective for your employer. However, it isn’t a decision that should be made lightly, as the last thing you want to do is push yourself into financial hardship.
If you’re looking to retire at 55, you would need to be saving £1,600 per year from the age of 25. The longer this is left, the higher the figure goes. As such, you can expect to make some difficult decision, and stick with them for the long haul. If you’re able to maintain this, then retirement could be closer than you think.
Break Your Retirement Plan into Stages
If you’re looking to retire sooner, then it makes sense you may want to explore the world a little, or seek out some adventure. However, this won’t always be the case, and as such, means that you may not need as much as you first thought to retire.
It makes sense that we get less active as we get older, and we need to ensure we’re looking after ourselves to ensure we’re getting the maximum quality of life. Taking factors like this into consideration may help reduce the retirement you need, meaning that retirement isn’t as unattainable as we thought.
Lower Your Cost of Living
It stands to reason that the more we spend now, the less we will have in the future, unless there is some dramatic change in our income. With this in mind, many look at their current lifestyle, and make changes where they can. What these changes depend on your lifestyle, but it could mean opting for a cheaper vehicle, cheaper holidays or a smaller house.
It may not be the most appealing aspect of planning for your retirement, but it’s one that needs some consideration if you’re looking to retire at an earlier age.
Can You Increase Your Current Income?
If you’ve been doing your sums and have realised that your current income isn’t going to cut it when it comes to early retirement, then it may be time to consider some changes. The first thing we should consider is whether we can get a raise in our current position. If this isn’t possible, then we may need to look for an alternative position or secondary role.
If we do need to take on a second job, this evidently means we will be working harder as a result, so it’s not a decision that should be made lightly. However, it is one you may need to consider if you’re looking to retire sooner rather than later.
Pay Off Any Current Debt As Soon as Possible
Avoiding debt can be nigh on impossible, but when we’re looking to retire early, debt is something we need to take control of as soon as possible, otherwise it can hinder our retirement plans moving forward.
When looking at our current debt, it’s not only the amount we owe, but also the interest. Depending on how many loans and credit cards we have, we could be paying an excessive amount of interest, something which would be better invested in our future.
Depending on the amount you owe, a consolidation loan could be the answer. You need to look at the current interest you’re paying, and then look at the interest of the loan. If the loan offers a lower interest rate, then it makes sense to take out a loan, pay off our current commitments, and the repay the loan at a lower interest rate.
If you do take out a consolidation loan, it’s important that you not take our any other lines of credit. Taking out credit on top of a consolidation loan is only going to add to our debt, which defies the object of the exercise.
Retiring an early age is certainly possible, but it can mean making several changes, meaning that it may not be for everyone. However, if you’re able to make a few changes and tighten the purse strings, then early retirement is certainly still possible.
Your company may be a team of 5 people, or it may have grown to have many departments, and many teams, all trying to work together as part of one finely tuned machine. No matter what your situation, it is very likely that, at some point, you are going to need to create a team, and make that team run as smoothly as possible. Here are the most important lessons in teamwork that financial outrage has picked up over the years.
Always be aware of what your team might be lacking, not just in terms of skills. If you are expanding, such as needing an IT manager, don’t hire just anyone. Think about who is on the team already, and find someone who has the personality, as well as the skills.
Maybe you already have some very vocal, ideas-driven members of the team, and you know that another hot-head who will butt heads with your financial manager or your marketing manager could seriously damage productivity.
Or maybe, you need technical innovation, so a pioneering IT manager is just what you need!
You might need a critical thinking ‘problem-finder’, to balance out all your ‘problem-solvers’, or vice-versa.
Trying to maintain that careful balance between innovators and producers, or critical thinking and creative thinking, to make your product or service the best that it could be, while maintaining efficiency, can be very hard. So don’t just think about the employee’s personal skills – think about how they could affect a dynamic for the better.
Probably the most important aspect of any team is communication. Do you find team members have regularly done slightly different work than you expected? Is one member of the team holding back their thoughts/ideas? Are there misunderstandings, or even unresolved conflict, that are negatively affecting productivity? Do you come out of meetings with clear, and mutually understood, resolutions, or vague long-term goals?
If any of this sounds familiar, then your team is likely to be wasting time and energy on unnecessary, or misunderstood, tasks.
Thankfully, communication is also one of the easier problems that can be fixed. It may feel unnatural, or even patronising, but taking the extra time to go over what has been discussed and decided on at the end of a meeting, can make all the difference. As can typing out, and sending round the minutes immediately for checking.
Be aware of anyone who is staying quiet and encourage them to talk, but make sure the atmosphere is open enough for them to say something stupid and not be shot down. Building up a friendly atmosphere is key, and there are more tips on this later. But, it is equally important not to allow a formal meeting to turn into a party. Make sure that only one person is talking at a time, and that the topics of conversation aren’t straying away from the goals of the meeting
Organisation is interlinked with every aspect of teamwork. The better organised your team is, the more you will succeed. But, this doesn’t mean that you should only hire the most organised team members you can find. You could be sacrificing something important.
If you have the resources for personal secretaries and an operations manager, then that is an obvious answer to any organisational issues. But, understandably, not all companies are able to do that from the get-go.
The essential thing to do is to be organised yourself, and to ensure that at least one other person on the team is as well, a ‘team manager’ of sorts. This could be an operations manager, or you could hire someone you know to be highly organised in any role, provided they will have the confidence and authority to organize others, when necessary.
If you are not an organised person, don’t panic. But you have to be honest and upfront about your weakness, and make sure to publicly give authority to the most organised member of the team to act as a ‘team manager’.
- Motivation and Socialising
Some teams can have issues of motivation. You should always aim to hire people who are excited to work in your industry or field. But, sometimes, people can become demotivated, and that can become a huge problem for quality and productivity.
There are many ways to motivate people, but the best way is to make everyone truly feel like part of the team. The easiest way to do this is to encourage socialising, not just a Christmas party once a year, but a few work events, and, even better, simply eating lunch together. It doesn’t have to be every day, in fact spending time apart can be just as healthy for a group dynamic as spending time together, but making sure you all eat lunch together once a week and don’t talk about work can build bonds that will benefit you
Are you thinking of spending your money in a venture wherein it might fall into a risk more than what you can generate? If layout a new business this will most likely perform a positive outcome which requires an amount of expected cash-flow. There will be potential business investors that want to see any means of progress that is divided into its logical steps that can be achieved. Keep in mind that each of the steps must be well planned together with an expert.
When it comes to developing financial strategies, many business people are promoting quality education for you to be knowledgeable regarding handling and managing your business company. This will also give you a thorough discussion between the common mistakes that most entrepreneurs are doing and having to achieve a goal one step at a time.
Benefits to gain
1. Identifying key milestones for you successfully build and enhance your venture.
2. You can develop a list of tasks that are associated with every successful milestone.
3. It is important that you can establish and set an amount of capital for you to raise funds.
4. Make sure that you can match your financial goals to every requirement.
As you embark the challenge of building and enhancing your business, it is important that you have a financial adviser or an accountant to guide you through the process of change in your business. More so, if you are a new entrepreneur, it is basic that you consider going through a journey with all the assistance that you need. In this way, your business will grow, and at the same time, you can achieve your goals.
Creating a business plan
Having to create a coherent business plan entitles you to perform each task that is required so that you will achieve everything one step at a time. What to expect?
1. Determine your key information if you want to set a business plan
2. Have a team for your business
3. It is important that you can write your business plan and its summary.
Since you are making business plans, this covers all of your financial planning for your business.
Targeting and be engaging to potential investors
Being proactive in your business is one of the major things that you’ll need to develop. This means that as soon as you have your target market, it is best that you engage with them. These potential investors can magnify the finances of your business. What do you need to do?
1. Make an investor’s file
2. Develop a list of investors
3. Target the kind of potential investors that can provide you with best opportunities
Delivering and developing a good winning investing plans
In this stage, you will get to finalize all of your business plans. A good pitch that will catch the attention to your potential investors provides great opportunities for your company and at the same time your management team. Of course, for you to be able to sell out a great partnership towards your investors, you need to design a framework to present it to your future business partners.
Therefore, having to develop financial strategies for the company is a good thing for you to consider if you want to have a growth of finance in your business. This guarantees that as soon as you have the assurance of partnership, it is expected that there is indeed a milestone. Furthermore, a chance to develop a business company gives you the chance to be made known towards your target market.