Published On: Tue, Aug 14th, 2018

Using Investments to Grow Your Money

Investing has long been the primary way to increase your capital. It’s an especially valid choice in these days of very low-interest rates, when money held in savings accounts earns very little, on the whole. Of course, investing has a degree of risk attached, but if you are conservative with your investments – going for low-risk options, spreading your investments across different sectors, and not investing more than you could stand to lose – you could achieve some worthwhile returns. If you’re considering the option of investing some of your money, what do you need to know?

photo/Gerd Altmann

Types of investments

There is a pretty mind-boggling array of different types of investment available, such as stocks, bonds, gilts, ETFs, various types of mutual funds, cryptocurrencies, real estate, and businesses. You don’t need to understand exactly what these markets are, as you can eliminate some just by examining how high-risk they are. You have the choice of using a financial advice service to help you choose how to invest, or simply registering with a broker and directing your own trades. If you want to get some help but are put off by the fees charged for personal advice, you could consider one of the range of robo-advice services available. These work by employing bots that have been programmed to deal with straightforward investment processes, with some offering additional personal advice if required.

Tax implications

Don’t forget, all your income needs to be declared on your tax return each year. That includes any interest earned, which would normally be classed as ordinary income. If you sell your investments, any profit would be considered a capital gain – or indeed loss if you sold below the price you paid. Dividends you have been paid from your holdings can be classed as ordinary in some cases, or as long-term capital gain in others. So you can see the tax could become a little complicated! To ensure you get it right, it’s best to use a qualified professional to help you prepare your return – either a CPA or an online tax accountancy service.

The long game

Investors who make the best returns usually do so from adopting a long game strategy. That means low-risk investments over long periods of time. It’s true that sometimes you see investors select stocks just before they rocket in value, and make enormous amounts of money very quickly. However, you’re just as likely to lose all your money if you adopt this strategy. Sticking with safe and steady investments over years and decades will normally be more profitable in the long run.

If you have money that you want to use for investment purposes, make sure you understand the risks involved with any strategy or sector before committing. Don’t put all your cash in one place, and be clear about fees and charges being levied by brokers and advisers. Also bear in mind that any money you make will need to be declared on your tax return. If all these conditions seem acceptable to you, then get started with your investment adventure and watch your money grow.

Author: Carol Trehearn

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