What is investing?

Investing is simply the process of buying something that you think will increase in value, and then selling it when you have made a gain.  

You can invest in many different things like art, wine, gold, property, vintage cars or sports memorabilia, but for most people investing means buying and selling financial instruments like stocks, bonds or funds.      

Why start investing?  

Whatever your goals in life, you will need to pay for them. To make money, you can either work - exchange your time, talent and effort for money - or you can invest.  

Investing offers you the chance to create a new source of wealth independent of your day-to-day job – and the gains you make when investing are usually taxed at a much lower rate than your income, which means that you get to keep more of your money.  

Bank accounts normally offer pretty low rates of interest, meaning putting money in the bank might be safe, but it is unlikely to help make you richer. By using a portion of your savings to start investing you’re making your money work for you – generating growth and returns while you live the rest of your life. 

What can you invest in? 

When you start out investing, some of the options you have include:

Stocks / Shares

Also known as ‘equities’. When you buy a ‘share’ of a company, you actually own a small portion of that business. If the company does well and grows, it will become more valuable, meaning your share of the company will also be worth more. Shareholders can also be eligible for dividend payments – effectively bonus reward payments for holding the stock. 

Bonds

A bond is a type of IOU that is issued by a government or company. When you buy a bond, you’re lending money out at an agreed interest rate and for an agreed amount of time. Bonds normally pay out interest on a quarterly basis and investors will also get their original amount back in full when the bond ‘matures’ (i.e. payback time).  

Funds and ETFs

Funds and ETFs enable you invest in hundreds or even thousands of companies (or bonds) in one go. If you wanted to invest in US companies, you could research and buy individual US stocks, or you could buy a fund that tracks the S&P 500 index, giving you an investment in 500 US stocks in one go.