According to new research, nearly one in 10 adults have started investing for the first time during the pandemic. Whether you’re interested in stocks and shares, Premium Bonds or cryptocurrencies, you might be tempted to do the same. But it’s worth knowing the pros and cons before taking the plunge.
What does investing look like?
Honestly, it’s a gamble. The aim of a good investment is to put money into something you think will increase in value. If your prediction is right, your money will go up. But if the opposite happens, you could end up with less than you started with, or even nothing.
What can I put my money into?
There are many ways to invest your money, and some are newer than others. Here are some examples:
• Stocks and shares: If you buy a share of a company, you’ll own a small part of it as a percentage. This means if the value of that company increases, so will your investment
• Cryptocurrencies:You’ve probably heard of Bitcoin or Ethereum. These are types of digital currency secured by cryptography (like a really secure password). The value of these currencies can rise and fall just like any other currency, depending on global demand
• Premium Bonds: Perhaps the least risky option is to buy Premium Bonds. Issued by the government, the bonds are entered into a monthly prize draw. The money you first put in will stay untouched
What are the pros and cons?
Different types of investments work in different ways. But generally the pros and cons are the same.
Pros of investing
Investing can potentially offer bigger rewards than saving, especially when interest rates are so low. If the market or company you’ve invested in rises in value, or you get lucky, you could see fairly fast (and sometimes big) results. But it’s also much riskier.
Diversifying – spreading your money across different types of investments can be less risky than putting all your money in to one thing.
Cons of investing
The markets are volatile and constantly monitoring your balance might get stressful. Prepare for losses, gains or flat lines to test your endurance.
There’s no guarantee of a return when you invest, so you may end up with less than you put in. Investing in cryptocurrency is very high risk and you’re unlikely to be protected if something goes wrong.If this gets you hot under the collar, consider Premium Bonds or savings instead.
Are there any other ways to invest in my future?
Saving might not have instant results, but it’s guaranteed to have results in the end. Rather than waiting for interest rates to rise, try using our Money Jar Challenge to help you grow your pennies yourself.