Can I make a profit by investing in assets? Investment is the topic of today. When it comes to investments, there are some good options like gold, stocks, high-yield savings, real estate investments, pensions and so many others that end up confusing the novice investor. Therefore, it is always good to be aware of the best types of investments available in the UK. However, it is also important to remember that past performance is no guarantee of future performance.
How to start investing
The first step to start investing is to be 18 or older. Therefore, an option is to open an account at a stockbroker. Thus, it is through the stockbroker that it is possible to access a wide variety of investments. That way, after having the account approved at the brokerage, all you have to do is make a cash contribution and determine how you will distribute the money contributed to investments.
The investments chosen will depend on the risk appetite of each investor. Thus, investors with a moderate profile may prefer more stable options, which offer lower returns, but have less exposure to major risks. Those with a more daring profile can opt for high-risk investments, but which also offer the possibility of greater returns.
When is the best time to invest?
According to an article published by the BBC, there is an old saying that goes, “Sell in May and go away”. Thus, the saying refers to the belief that stocks may underperform in the summer, which runs from May to October. Therefore, the saying suggests that they perform better between November and April.
In this way, it is the same as selling stocks in the spring, before the lull of summer, and after that movement, buying stocks again, in the fall, just before they rise in value again. This movement is called the “Halloween indicator”.
According to information from the article, published in 2022, there is a lot of truth in this saying. The article presented a pattern that was maintained in 36 of the 37 markets analyzed globally. The movement was stronger in Europe. The research looked at evidence from the UK dating back to 1964.
So should an investor follow this adage? It depends! It is up to each investor to test strategies that best fit their profile. Because, as each investor has a profile, he needs to analyze whether he is willing to take the risks of each strategy he adopts.
What are the best types of investments in the UK?
There are good investment options in the United Kingdom, which the investor should know and analyze if these options fit his profile.
Investing in stocks with dividends
Investors, after opening an account at a brokerage firm, can invest their money in stocks that distribute dividends. Dividends are a profit share that some companies distribute to their shareholders.
To grow the portfolio, many investors use the dividends received to buy new shares and further increase the profit potential. BP or Vodafone stocks are often options for investors looking for dividend returns. However, everything depends on an analysis of each investor to determine whether to invest or not.
What is a Equity and Equity ISA
In this modality, the investor does not need to pay income tax or capital gains tax on what he earns through the ISA. However, this happens up to a certain limit. Through the ISA, the person is investing in a wide range of mutual funds, bonds, mutual funds and stocks. Therefore, this investment must be seen as long term, that is, the amount can be invested for at least 5 years or more.
The investor is free to decide to invest everything in a stock and equity ISA, or to spread his investment in other types of ISA. It is important to remember that an investor can only have one ISA of each type and to be tax exempt they need to remain within a total limit of £20,000. What goes beyond that, taxes may be charged.
Bearing in mind that investments in stock and equity ISAs are subject to volatility, so they can generate profits or losses. Therefore, it is up to the investor to decide whether he is willing to take the risks in order to have more chances of having a better return.
Investing in a personal pension plan
Another type of investment is a personal pension. In this modality, a contribution value is defined. The investor himself chooses the amount he will contribute, either monthly or annually. The investor contributes for a period, to then receive this resource in a single installment or monthly.
In this modality, the amount invested can have tax benefits and a large part can be tax-free.
Types of private pension
Currently, three different types of personal pensions are available to investors. They have characteristics in common, and can be used as a pension scheme in the work environment itself.
Stakeholder pensions
In this modality it is possible to make lower contributions. In addition, the investor can interrupt and restart contributions at no cost. While the annual charges are limited, they are not always the lowest of other pension options.
Standard personal pensions
It is a modality offered by the vast majority of pension providers. Usually an investment option variety is offered.
SIPPS (self-invested personal pensions)
In this modality, the investor is offered a broader and more sophisticated investment option than the stakeholder or standard pensions. However, this hands-on management can also come with higher fees.
Real estate investment fund (REIT)
First, it is necessary to understand that a real estate investment fund (REIT) is nothing more than a company that owns, or else finances, or operates properties that generate income. In this sense, when the investor acquires a real estate investment fund, he receives a share of the profits. In addition, you can count on the valuation or devaluation of this real estate investment fund.
Investing in Gold in the UK
Investing in gold is not as complicated as many people think. It is possible to invest in gold through a brokerage. The other can be a strong stability asset in any investor’s portfolio. He is in great demand when the economy is going through turbulent times.
Precious metals, especially gold, have become a haven for many investors over the years. So many leave their money invested in gold until the gold rises in value. In addition to using a brokerage, anyone who wishes can buy gold bars. However, keeping it at home can become a risk. Therefore, to invest in gold, you need to know that it behaves differently from other assets. It is very common for the price of gold to rise when the stock market falls.
It is important to stress that gold is not risk free. Although it is seen as a “safe haven” by many investors, it must be borne in mind that its price may end up decreasing due to external factors such as demand, supply, the state of the global economy, and also political uncertainty. Therefore, gold also has volatility.
Gold does not offer dividends or interest. The hope of return is through the appreciation of its quotation in the long term. Choosing to buy physical gold can be a more expensive way to own this asset. Plus secure storage costs that can be expensive.
Will all these investment options provide profit to the investor?
It is important to reinforce that past yields will never represent guarantees of future yields. Therefore, there are no guarantees that all options will provide profits. For this reason, each investor needs to make an analysis and assume the risks of these investments, even if they are currently considered one of the best options in the financial market.