The financial world is going through a difficult time as persistently high inflation and rising banking interest rates both shorten the chance of a global recession. As someone fairly new to investing, this would seem to indicate the need to shy away from significant investments and place your money in safer places. But investors must think about what could go right, and although the stock markets and economies march to a different beat, it pays to be optimistic. These circumstances, where both homeowners and businesses are struggling, can strangely produce situations that often offer valuable benefits to the investor. This short piece will help you take advantage of these opportunities by giving you seven great tips for the first-time investor.
The Magnificent Investing Seven
Before we go any further, it is always vital that any investor remembers that any investment, especially high-risk ventures, can go up and down, meaning you may not get back the funds you initially invested.
- Consider placing some of your money in another country; popular choices are Switzerland or the Bahamas; offshore banking can offer higher interest rates and possible tax-efficient savings if you are happy for your funds to sit in a low-risk option.
- Always take advantage of your annual ISA and pension allowances, they offer valuable tax benefits, and between them, they are a great way to both achieve your investment goals and set you up for later life.
- High-risk investment funds obviously involve greater volatility; they will look to invest in mould-breaking companies and entrepreneurs prior to them being publicly listed on the stock markets. This type of investment looks to predict winners with a long-term view when the markets move in an upwards direction and provides an excellent return.
- You can choose to place your assets with a professional fund manager who can conservatively invest them in shares, bonds, and commodities such as silver and gold. This is a low-risk type of investing, often called defensive investing. It is a good option for a new investor who has a limited amount of financial knowledge.
- Take notice of interest rates; lower interest rates are positive for share prices and bonds. Government bonds outperform corporate shares in this situation and eliminate company-specific risk. Investing in a fixed-income bond fund during a recession is a good low-risk investment.
- In the middle road of investing are stock funds that look for value in the shares of medium and larger companies that are out of favour. This fairly defensive outlook has a longer-term growth potential that also benefits the investor with a higher-than-average dividend yield.
- You can diversify your investment portfolio by investing in commodities; among the best are crude oil, gold, and other base metals. Commodity investment is done in a number of ways and is a good idea as the fluctuations of commodities are not normally linked to the ups and downs of the stocks and bonds of your other investments.
For the investing novice, it can seem difficult to know what to do with your money, but if you always try to minimise risk and maximise the profits, you will not go far wrong. Good Luck.