Investing money is often seen as a sophisticated activity, perhaps reserved for those with holdings enough to own companies or significant swathes of property already.
But investments are akin to savings, in that they are mechanisms for preserving and even growing money you hold.
Now more than ever, as costs rise and the future grows ever-more uncertain, investment is an incredibly useful route to security.
The Principles of Long-Term Investment
Long-term investments are ‘slow-burn’ vehicles for growing your wealth.
When we think about saving money we think about traditional savings accounts; however, these are not efficient at maximise growth potential, where other products are much more likely to deliver returns.
Ultimately, long-term investment is all about returns.
You place your money in an investment or financial product for a long period of time, with the reward being a palpable increase in your holdings’ value.
Types of Long-Term Investment
There are some easily accessed services and products that enable an efficient route to long-term investment and returns.
One product is called an individual savings account, within which any interest generated is tax-exempt up to a certain threshold.
ISAs can also act as vehicles for other kinds of long-term investment, namely investment in stocks and shares.
The stock market is not just something to engage with as a day trader, but also a system that can produce relatively low-risk returns over time – particularly through investment in funds or indexes.
ISAs keep any profits made in this regard tax-free to an extent, too.
Investment can also be considered in terms of tangible assets.
Millions of us invest for the long term without thinking about it, by purchasing a home.
House values tend to rise, despite temporary price or market aberrations as with recent months.
Over a period of decades, property investments can provide inflation-beating returns.
Approaching Long-Term Investment
It can be tempting to start your long-term investment journey immediately, but this is not likely to be the most efficient or suitable strategy for your finances as a whole.
Long-term investments, without a short-term savings strategy in place, could even be harmful to your situation – particularly where risk is inherent to certain investments.
Before you make steps towards building a portfolio of investments, you should first work towards an emergency fund.
Your emergency fund should equate to a few months of your average income, whether personally or as a household.
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