Search & Compare
US Mortgage Loans Mortgages
Mortgages from the Yorkshire Building Society. Mortgage Lender of the Year. Endowment Compensation
Get the Compensation you deserve with Keypoint Endowment Claims. For information on UK towns visit Town Pages for local business information.
How Best to Privately Invest - [BACK] In the world of personal finance, it's normally investments that flummox the most. While our short term outgoings are governed by bank accounts, mortgages, and credit cards, few people understand the best ways to put money away in the long term, and the stock market is seldom properly understood. However, getting your head around long term savings through the stock market needn’t be too difficult. It's actually extremely easy to start putting your money away to save for the future and get very high returns. The Stock Market If you're going to be an investor, it's not completely necessary that you understand the ins and outs of the stock market. In short, the stock market is a market where shares or portions of companies are traded. Markets are divided up by countries and put into indexes. You may have heard of the FTSE 100 – well, that's an index that list the top 100 companies within the UK. Other examples of indexes are the Dow Jones Industrial Average (sometimes written as DJIA), which lists the top 30 companies in the USA, and the Dax 30, which lists the top 30 companies in Germany. You can take a look at any of the performances of these indexes at any time at Yahoo! Finance. Trading Once you've familiarised yourself with markets and indexes, then you may want to dive in and start trading. However, be very wary. If you're going to invest conservatively for the future, and not suffer a few sleepless nights worrying about what the market will be doing in the morning, then you'll need to have it drummed into you: investing is best for the long term. There are plenty of stories about how people won pots of cash in days from investing correctly in the stock market. But, in short, most of them just got very lucky. Trading day to day on the stock market is an extremely difficult game, and if you take trading fees and stamp duty (a tax on the purchase of shares) into consideration, then it's near impossible to make money in the long run. Additionally, there's no real way to know day to day what a stock is going to do. There are far too many factors involved in the market for anyone to accurately predict what's going to happen; although in the long term it's a different story. If you want to be a day trader, then you might as well stick to the lottery or start betting at a website like Blue Square. Investing Probably the best way for private investors to get started is to look into investment funds that track the performance of an entire index. It's certainly fun to pick stocks individually, but it's also very difficult; even the professionals struggle to get it right. If you invest in a particular index, then you'll effectively be investing in all of the companies listed within that index, which is an easy and effective way of spreading your money. You can invest in index tracking shares (ETFs), which are also called iShares, or you can invest in a managed index tracking fund. To do the latter, you'll need a minimum initial investment- normally £500 – and then you’ll need to be prepared to put away a minimum of £50 a month. One of the most effective ways to do this is through an index tracking stocks and shares isa. Take a look at Legal and General for this and other investments. But Isn't the Stock Market Going Down? It’s true that the stock market has seen some turbulence of late, particularly in early 2008. However, it's important to think in the long term, rather than day to day turbulence, because you’re not going to day trade! If the stock market does take a short term plummet, then that doesn't actually need to be such a bad thing – you can buy at a time when stocks are cheap, because in the long run they'll almost certainly rise up again, particularly if you invest in index tracking shares or funds. Just think like this – when the FTSE 100 index first opened in January 1984 it was worth 1000 points, but today it's worth over 6000 points. That's a 600% return over 24 years – which bank is going to give you that? It's the same with other indexes too; in the long term they go incontrovertibly up. So, if you want to make your own private pension fund, then stocks and shares are the best option. [BACK] |