Where To Invest?

Where To Invest?

Where to invest is a big question posed by those interested in making investment. Some investments are safer than the others. The general rule is the riskier is the investment the higher are the potential returns but at the same time there can be great potential losses as well.

Some factors determining where to invest are:

  • Where to invest depends upon the attitude of the investor whether the investor is cautious, adventurous or somewhere in between.
  • Where to invest also depends upon the age of the investor. Those close to retirement tend to make cautious investments.

The safest way to make the investment is to divide the total investment amount into different types of investment. This diversification balances the potential risks and the returns from various types of investment.

Where to invest is not a big issue when investing in safer investment options like:

  • National savings and investments- these investments are 100% safe with the government security. Where to invest is smartly sorted by the direct saver where the minimum investment of 1 pound earns 2%, on which the tax has to be paid. Fixed interest savings certificate lock the investment for 2 and 5 years and pay 1.25% and 2.25%, which is tax free. Index- linked savings certificates grow along with the retail prices index plus 1%. These are tax free and can be obtained from the post office for 100 pounds. If the investor is seeking for the safest where to invest option, then this is the answer.
  • Fixed rates savings bonds- they are also a safe answer for where to invest. The investors can earn the interest of upto 5% on long term fixed rates bonds. 3 years fixed rates savings bonds give the interest of 4%. All the investments are covered upto 50,000 pounds by the financial services compensation scheme.
  • Gilts and bonds are another safe solution for where to invest worry of the investor. You can obtain the gilts from the government’s debt management office or through a stockbroker.
  • Absolute return funds are safe answer to where to invest. These funds use complex hedging techniques to minimize the risks. These funds are safer than the conventional funds as even if their value falls they remain less volatile.
  • Gold is also a safer answer to where to invest. Gold is also volatile but the value is independent of the financial strength of the government or companies. Gold is also bought and sold like any other share.
  • Defensive shares are the best option on where to invest as they do well even in the times of economic downfall. There are certain well financed global businesses which manage to maintain the value of their dividends better than the government and market bonds.
  • Individual savings accounts are a safe answer to where to invest. The interest and dividends earned on the individual savings accounts are tax free apart from the 10% tax that is deducted before the dividends are delivered to the investor. The investor does not have to pay capital gains tax on the gains from the individual savings accounts.
  • Pooled or collective investments are also an answer to where to invest. Here many investors pool together their investments.

For those seeking for adventurous where to invest options, here are few options:

  • Spread betting is the where to invest answer for those who do not shy away from taking big risks on investment. There can be huge profits but at the same time can be large losses too. Spread betting firms also provide the guidance on how to bet safely to avoid losses.
  • Bull funds are again one of the options for where to invest. These funds give double the return of FTSE100 Index.
  • Emerging markets provide decent answer to where to invest. These markets have great potential to grow and provide good returns on investment. The best way to start is to invest in general emerging market funds.
  • Property investment is also one of the options for where to invest. Commercial or residential property can be invested in to earn decent returns in good times. Property figures are difficult to calculate due to rent and maintenance cost calculation hassles.
  • Commodities like petroleum, coffee, and copper also are an answer to where to invest for those seeking investment areas. Although these are volatile in nature but may yield good returns also. They have a tendency to give bad returns for ling followed by good returns for long periods.
  • Investing in shares is considered to be the best answer to where to invest problem. This is because the shares can be bought and sold quickly and cheaply in any amount you want. The shares can be directly bought and sold from the company or the fund manager can do the task of managing the shares according to the market trend. Funds can be obtained which invest in particular industry type like mining, coal, copper etc. there are some funds for small investors which invest only in small companies with lower risk of loosing much.
  • One way to manage the funds is to follow the strict set of guidelines on where to invest and when to invest; this saves the fees to be paid to the fund manager.
  • Where to invest is a tricky question as there are rewards and losses in the investments. The reward/risk pyramid indicates the low, medium and high risk investments which earn low, medium and high returns respectively.

Top of the pyramid:

It shows the highest risk and returns investments.
The value of the share keeps fluctuating, sometimes high and sometimes low.
The longer the shares are held, the longer is the duration when the investor has to bear the ups and downs in the share values. Collective investment fund minimizes the risk by investment in various shares managed by the fund manager.

Middle of the pyramid:

It indicates the safer investment options like cautious funds, balanced funds, with profit funds and property.

Base of the pyramid:

It indicates the safest investment in ISAs, deposit account and fixed rate bonds.