An investment is to commit money to purchase a financial instrument for a higher profitable return. Financial investment is to buy securities, financial assets in the money markets or to buy liquid assets like gold and commodities. With an increase in cash flow, hoarding cash is a loss. It is wiser to invest it and make more money from the same capital. There are plenty of financial investment options to choose from. Invest according to your financial need after thorough deliberation. Make the investments through intermediaries who charge a nominal amount for the services rendered. Banks, mutual funds, insurance companies and investment companies are some organizations that are legal and offer financial investment services.
Types Of Financial Investment
Shares, equity investments, property, and bonds are the various types of financial investments. These are moderate-high risk options that offer higher returns of earning. There is a risk factor involved as there are chances of losing some or the entire capital when wrongly invested.
Savings accounts are a traditional form of financial investment where the money is saved on a regular basis and there is no capital loss as an investment risk. The inflation may devalue the money, in a worst-case scenario.
Set Financial Goals
Financial goals will help analyse and make efficient financial investments.
- Make both short-term and long-term financial goals accounting for undue changes like divorce that may affect the goal.
- Detail your finance position based on your income and expense on a monthly basis.
- Identify the various financial investment instruments.
- Choose a financial advisor like SWAIN and Morgan Stanley to help maximise your wealth at less risks.
- Make the right financial investment option best suited to your needs and goals.
Making A Safe Financial Investment
Make the financial investment to achieve your need. The following steps will go a long way in reducing your time, effort and risk factor in making a financial investment.
- Explore the options and each individual option in greater detail. Evaluate the potential of the financial investment instrument. Determine the stability of the company, the unit price and the competitor’s price, if investing in stocks.
- Gain an understanding of the history and the current status of the financial investment instrument. Understand any hidden lien and the mitigating circumstances, for better clarity.
- Project the future performance and the return expected on the financial investment. Obtain the counsel of an authorised financial advisor who can minimize your risk using their knowledge and expertise
Ways Of Saving And Investing
Saving is an excellent financial investment in the short-term while investing is profitable in the longer duration.
- Banks and building societies offer savings accounts at different interest rates, minimum deposits required and withdrawal options. Explore and compare the various schemes and choose the best suited.
- National savings and investment products are safe as the government takes responsibility. They guarantee returns and provide tax benefits. Some examples are Child Trust Funds, Premium Bonds and Savings Certificates.
- Credit Unions are local co-operative financial organizations. They offer flexible and community based savings and loan products. Ensure they are regulatory and authorised forums before investing.
- Cash Individual Savings Accounts (Cash ISAs) are traditional saving schemes that are tax-free savings and are not a risky proposition.
- Individual savings accounts (ISAs) can be in the form of cash, shares or insurance. There is no tax levied on the dividends or interest. Capital gains tax is also not charged.
- Shares are a popular financial investment option. You purchase stakes of a company at a stipulated market price. The company issues dividends to the shareholders when it is profitable. There is also a chance of losing some or the entire investment amount when the company does not perform well. This is a reasonable safe option as a long-term strategy.
- Collective investments are pooling of funds for a single investment fund operated by a fund manager. They are beneficial as the risk is shared by all the investors, various choices of pooled investment backed by sound professional advice at lower costs. Unit Trusts, Open Ended Investment Companies (OEICs), Exchange Trade Funds, Investment bonds and endowments by life assurance companies.
- Bonds are traded on the stock market at a set interest rate. Loans to a company, local authority or even the government are all bond options. Companies issue corporate bonds at nominal value and stayed interest rates each year. Gilts are stocks issued by the government at a fixed rate of interest. They are a moderate risk option as the government issues them. Bond funds offer a variable return as the financial investment is on different bonds at various interest rates and maturity dates.
Choosing The Best Financial Advisor
An authorised firm can offer you sound advice that will save time, effort and risk associated with making a financial investment. Investments, mortgages and insurance are regulated and procedural according to the Financial Services Authority (FSA). The financial advisor will recommend the financial product according to your need for a pre-determined fee that may include commission. Discuss in detail regarding the financial status, goals and risk levels with the advisor to help make a worthy financial investment.
The scope of advice will vary with different products. You can receive:
- Independent advice where the advisors make recommendation after researching the whole market.
- Tied advice where the financial products of a single provider are explained in detail to your benefit.
- Multi-tied advice where the financial products of limited providers are listed and evaluated to your advantage.
The advisor will provide a written recommendation and information of the financial product. Understand the terms and conditions, the details concerning product, the financial investment and the tax. Make implicit note of the risks involved. Finally, check the extent to which this financial investment helps you attain the goal. Walbrook, Morgan Stanley, Merrill Lynch International and Polar Capital Partners are some prominent financial advisors to companies, governments and investors.