Practical Investing Advice – What You Need to Know to Get Started
Wise investments: Start Investing Today for a Better Tomorrow
How to invest?
So far, my blog has been thoroughly focused on eco-friendliness and zero-waste living. And even though staying on the eco-friendly side of things is very important for living a good life, it’s by no means the only requirement. If you truly want to be happy, you need to take care of all aspects of your life and you need to do it effectively. If you go online looking for happiness advice, you’ll encounter many people advocating that you don’t need money at all. But that’s not entirely true. As I’ve noted in one of my recent posts, money certainly isn’t something to obsess over, and you can do just fine with whatever you’ve got at a given moment. There is, however, something that a lot of people seem to misunderstand when it comes to finances and happiness. It’s not about “having lots of money”, but rather about having financial security and stability. It’s all about knowing that you can support yourself (and your loved ones), that you are mostly reliant on yourself and that no matter what happens, you can always get back up on your feet.
And while a couple of my most recent posts have been leaning in this direction, I feel like I’ve barely scratched the surface.
This month, we’ll be concentrating on investments. In today’s post, I’ll try to give you an overall idea of how, why and when you should invest. I’ll show you how I learned what I know and what you need to do to learn the same. Following that, next week, we’ll have a detailed look at the different types of investment that I’m personally most familiar with – properties as well as passive and active income.
Over the course of this article series, I’ll be tackling the following 14 types of investment:
- Profiting from buy to let properties
- Property Flipping
- Individual Savings Accounts – the importance of using your ISA
- Self-Invested Personal Pensions and you
- Investing in Gold
- Investing in Diamonds
- Investing in Stamps
- Investing in Coins
- Investing in Bonds
- Active Investments and the things to be mindful of when working with them
- Passive Investments – Index Funds and ETFs
- Venture Capitals and You
- Peer to Peer Lending and how to leverage it
- Forestry Investment
First things first
Before you even start investing, you need to have a firm grip over your finances, which usually means having a stable income. But don’t worry – you don’t need to wait until you have a business of your own! As a matter of fact, I’d say that the sooner you get started with investing, the better!
So how do you get control over your finances? Simple – you think before you spend! If you want to eventually become good at investing, you will need to really be on top of your budgeting game and know where and what to spend your hard-earned money on. Even if you aren’t really interested in investing any time soon, you should work towards improving your budgeting skills, as they are the first step on your journey to financial freedom! For a full guide on property investment have a look at this book on Amazon after you read my article!
Think before you spend!
Regardless of your current goals in life, saving money can only benefit you in the long run. And, for those of you planning to invest in the near future, knowing how much you can spend and how much you should set aside is absolutely crucial. My zero-waste living posts can really be useful here, as they’ll help you lower your spending tremendously. Eco-friendly living isn’t only good for your health and for the environment, but for your wallet as well – it’s a win-win scenario!
You might not realise it, but all of the little expenses for coffee, bottled water, throw-away items, useless trinkets, clothes that you aren’t going to wear, and so on, really add up! You can check out my article on the subject here.
When you start saving, you need to set up a goal for yourself. Most financially-aware people aim to set aside at least 20-30% of their income. The majority of people, however, don’t even go as high as 10%. And that’s a problem. Even if you don’t plan on setting up businesses, investing in properties or looking at the stock market, living life from pay-check to pay-check is guaranteed to have a detrimental effect on your self-confidence, social skills, and sometimes – even on your mental health. To truly dominate property investing I recommend reading Mr. Alven’s book to achieve financial freedom.
As with all new things, I’ll suggest that you try and start small. Aim for 10% of your income at first and gradually work your way up as you get used to the lifestyle changes that come with this.
The UK presents us with excellent investment opportunities, as we’ve got the ability to work with ISAs (Individual Savings Accounts) and SIPPs (Self-Invested Personal Pension Schemes).
Working on your Individual Savings Account is the very first thing that you should do. For the longest time, I didn’t pay ISA any attention. It wasn’t until 2014 that I finally decided to look into it and I realised the missed opportunity. If you’re reading this and still haven’t started working on your ISA: I’d advise you to immediately start reading up on it!
Years ago, when I first opened my business account in 2001, I was encouraged by the HSBC to open a pension scheme – SIPP. At first, the idea didn’t really appeal to me. I was merely 28 years old, why would I need to worry about a pension? The bank manager, however, calmly and politely went over the undeniable long-term benefit such a scheme would have for me. Not only was it tax-free (provided that I paid for it via my company account as an employer contribution), but I only needed to put forward a measly £10. Eventually, I decided to give it a shot and started small – with the suggested deposit of £10. As the years went by, and my interest in investments grew, and so did my deposits. Now that I’ve really gotten my businesses off the ground, my deposits have increased tenfold.
Looking back at it, 18 years later, I’m delighted that I did! Thanks to this scheme, in 2014, I’ve managed to get my first commercial property investment, and it was really successful!
Even if you were to start small – say, by investing £100 every month, in 10 years’ time, after the compound interest has really had the time to kick in, you’ll find yourself with a considerable sum on your hands! I covered the first steps you could take in a separate article.
By the end of 2014, I realised the mistake that I’ve been doing by overlooking my ISA and, deciding that it’s time I stopped putting everything I have in properties, I began studying stocks and shares.
The importance of knowing how to invest
Learning about investment is, in my opinion, one of the most crucial steps towards ensuring your financial independence. Regardless of whether you’re currently a business owner or an employee at someone else’s company, investing wisely will significantly expand your options and give you a whole new level of financial freedom.
The first time I heard of the term “investment”, I was 18 years old, and my dad was investing in a small pension scheme in Bulgaria. Sadly, it didn’t work out well for him, as the fund went bankrupt. My next encounter with investments happened when I was already in London. At the time, I was living in a rented apartment. My landlord would come over every Sunday to collect rent, and he mentioned that he had 10 properties and he visited them every Sunday. This gave me an idea. Once my business became successful, I would start investing in properties! My goal was to have at least 10 properties by the age of 40. Every year I’ve been investing in new properties and, even though I won’t go into details about how many properties I own right now, I’m going to tell you that my idea has really paid off!
Invest in a variety of things
For most people, property investment can seem prohibitively expensive at first. If you’re having difficulties getting enough funds together to get started, you can always get in touch with a property fund and work your way up from there.
If for one reason or another, properties aren’t your thing, there are a lot more ways for you to invest!
Some people invest in coins, others, in exotic wines and stamps. If you do your research well enough, you can even invest forestry (even though you can’t buy a whole forest, you can still invest in a small portion of one with the help of a representative company). And even though I haven’t personally tried out options or bridging finances, they most certainly deserve a mention, as they are also very lucrative. Other ways to invest include:
- Venture Capital
- P2P Lending (Peer-to-Peer Lending)
- Bond Funds
- Passive and Active Funds – dividend stocks and value and growth stocks
Over the last few years, I have done extensive research on property investment, and I’ve worked towards building a robust portfolio for refurbishment and flipping. It might sound incredibly complicated, but once you wrap your head around it, it’s actually not all difficult – you buy an old property, refurbish it to give it value and sell it straight away. I’ve already had the pleasure of working on five different projects, and I’m really happy (and proud) of my progress.
In 2015, I also began looking into trading. I really wanted to understand how banks operate, and I signed up for a quite expensive course. And even though I ended up deciding that this type of investment isn’t for me, I still got a bit of value out of my training as I met a lot of fascinating people there. I became good friends with some of these people and we’ve since worked on a couple of (quite lucrative) projects together. So, even if the courses themselves didn’t help me directly, I still got more than my money’s worth out of the whole adventure.
And before we go into stocks, I want to talk about gold briefly. I’ve been approached about gold investments a couple of times in the past and, after eventually deciding to give it a shot last year, I realised that it’s not my thing either. There’s just too many storage fees. Every year, you’ve got to pay that fee, and I just don’t feel like it’s that great of an investment for the type of capital that I’m working with.
The Stock Market
I’ve also spent a significant amount of time studying the stock market in the last year, and I’ll give you the gist of it in this paragraph. There are two routes you can take about working with the stock market – passive and active investments.
The passive investments option is all about working with index funds. It’s a much safer (and therefore – easier to start off with) choice for beginners, as it all comes down to dealing with computer-generated funds that can be anywhere in the world. Your investment will move around, following stock market trends.
Active investment, albeit a bit trickier, is every bit as lucrative as its passive counterpart. As a matter of fact, they can net you incredible profit in relatively shorter timeframes. Their downside lies in the fact that most people will need to do a lot more research before being able to partake in active investments comfortably.
Before you get started with active investments, you’ll want to familiarise yourself with the given company. You should look into three primary parameters:
- Their Balance sheet
- Their Income Statement
- Their Cashflow Statement
Over the past year, I’ve been looking into active investments pretty seriously, and I’ve found a ton of great resources that I’ll gladly share with you! Below you’ll find a few really amazing YouTube channels with numerous videos by seasoned active investment veterans.
For keeping track of individual stocks, I use a paid platform. If you are just starting out, however, and would prefer a free alternative at first, you can try out Yahoo Finance or MSN Finance. Albeit a bit more limited and lacking in the customisation department, they’re both pretty similar in basic functionality. I’d also advise you to subscribe to Stockopedia – they’ve got a ton of useful information, advice and strategies.
Before we wrap it up for today, I’ll give you a quick summary of the two most important things when it comes to investments:
The sooner you start, the better – If you want to invest, do your research and get started! There’s no need to wait until you’ve set up a business of your own, or anything of the sort.
Don’t neglect your ISA – Read up on how the ISA works and start working on it as soon as possible. Doubly important if you’re already running a business, fully utilising your ISA can alleviate a lot of issues surrounding taxes (you can save up to £20 000 pounds per year and invest them tax-free!).
At the end of the day, I’d suggest that you do some research on the subject, regardless of whether you choose to invest any actual funds. In the digital world of today, all knowledge is power, and you can only benefit from knowing more about any subject, especially if it’s related to finance. Understanding the basics of budgeting, learning how the banks and stock markets operate and learning to control your spending will only help you in the long run!
Please keep in mind that I am not a professional financial advisor, and this entire post is based upon my personal experience with investment. As with most other content that you’ll find on my blog, this article aims to give beginners some reference points and basic tips. Please do not assume that I am an expert on the subject and always do your own research and choose options that work best to suit your own situation!
What about you – Do you have a long-term plan for your finances? Have you done any investing before? Do plan on giving it a go in the foreseeable future?
If you found this article useful and would like to see me post more content of this type, please let me know in the comments below! As always, if you feel like I’ve missed something, or if you’ve got some interesting tips, tricks, or experiences to share don’t hesitate to drop me a line – I always love hearing from you!
Thank you all for reading and I’ll see you next time!
Stay green and motivated!