How Much Capital Should You Invest?

How Much Capital Should You Invest?
I get a lot of questions from first time investors regarding the topic of how much they should start investing with.
Many investors think when they first start out that they should invest all of their savings. This isn't only unnecessarily true but could also be very dangerous, if you don't have a trading system or the disciple to follow it. As you could easily wipe out your whole account if you don't have a trading system in place.
To determine how much capital you should invest, you must first determine what your financial goals are and how much you actually can afford to invest.
First, let's address the issue of how much capital you can currently afford to invest. Do you have any savings that you can use? If you do, that's great! However, remember that you want to be able to live comfortably so don't cut yourself short when you tie your capital up in an investment. What were your savings originally going to be used for?
It is always important to keep a reserve of three to six months living expenses in a readily accessible savings account - DO NOT invest that money! Don't invest any money that you may need in a hurry in the near future.
Begin by determining how much of your savings should be used for investment purposes and how much should stay in your savings account. Unless you have funds from other sources, such as an inheritance that you've recently received or you got really luck and won the lottery, this will probably be all the capital that you currently have to invest.
Next, determine how much you can comfortably add to your investments in the future. If you are holding a job, you will continue to receive a monthly salary, and you can plan to use a percentage of that income to build your investment portfolio over time. Another thing you can do is speak with a qualified financial planner to set up a budget plan to determine how much of your future income you will be able to invest.
With the help of a good financial planner, you can be sure that you are not investing more than you comfortably should - or less than you should in order to reach your investment goals.
For many types of investments, a certain initial capital investment amount will be required. Hopefully, you've done your research, and you have found an investment that will prove to be sound. If this is the case, you probably should already know what the required initial investment amount is.
If the money that you have available for investments does not meet the required initial investment, you may have to look at other investments. Always remember to never borrow money to invest, and that you should never use money that you have not set aside for investing!

Four Investing Mistakes You Should Keep Away From

Investing as early as possible is very advisable. Having investments gives you an opportunity to accumulate more wealth. There are various ways where you can put your money. You can invest in stocks, real estate, mutual funds, bonds and other financial instruments. There are kinds of investments where profit is really big. However, not all investments are perfect. There are instances of investing mistakes you will encounter. As much as possible you should be careful about your investment strategies. Even experienced investors made mistakes. So, if you want to start investing for your future, you must avoid mistakes. Of course, it is inevitable to make mistakes but at least you can avoid it.

If you have enough knowledge, you will be able to handle all your investments well. Investing is not always a success. You will also deal with failures especially if you're just starting. One of the common investing mistakes is untimely investments. Before you should contemplate on investing, you should be aware of your resources. Make sure you have excess money in your account. Your basic needs must not suffer because of your investing decisions. Some people invest money even though they still have lots of outstanding debts. The very purpose of having investment is sufficiency of resources. If you're still not ready, then don't do it.

You should clear all your debts before deciding to have your first investment. Part also of the investing mistakes is not doing a research on particular investment. For example, some people will just put their money in mutual funds because they heard success stories. Don't you ever do that- it's different for every investors. It's all right to invest in profitable investment but make sure to have a particular knowledge about it. If you want to invest in real estate, you should be aware of the real estate industry. Determine the ways on how you can gain profit in your investment.

Another mistake you can avoid is looking for fast results. Always remember that investing is like gambling. You will never know what will happen to your investment. If the universe will conspire to your favor, then you'll be lucky. Not all investment leads to profits. There are times when your investment strategy will not work out. Investments mistakes also constitute lack of diversification. It's not advisable to stick with one investment only. If you have already invested in real estate, try other kinds of investments. You can either invest in stocks, bonds and others. There are high risks investments which gives you big profits.

Remember the rule of financial leverage. If you will hit the jackpot, you'll be lucky. But if you're in the losing side, you'll incur extreme losses. It's better to have diversified investments. Make sure not to put all your money in just one trade. Try to diversify as much as possible. Lastly, investing mistakes include not paying attention to investments. Some investors often lose their interest. They are just interested at first then the next time, they don't follow up anymore. The best thing to do is to keep updates on your investments. Investing is really healthy on your financial resources.

It will increase your wealth and create abundance in your life. Just make sure to invest wisely.

Investing Secrets of the Wealthy

My favorite subject. Investment. Investing in your own e commerce business is the best, most time efficient way to make money. But to grow real wealth you need to diversify into other investments as well. Your e commerce business (or other business / high paying job) provides the cash for investing. It is the interest earned of those investments however that pays for your luxury lifestyle.

1. Real Estate investment.

The most important and first investment you should make is to buy your own home. Initially live off your income from your e commerce business by paying yourself a modest wage. Save the rest for a deposit on your own home. Decide where you want to live and go house hunting there. The real estate market moves in cycles.

The top of the cycle is definitely not the time to own investment residential property. If you own it, sell it, especially if you have a mortgage over it or you may end up owing more than the property is worth. Remember if your equity in a property drops below a certain level the bank can foreclose on your property even if you have never missed a payment. Many people have come undone that way.

When it does become time to invest in property again, seize the day! Investing in property can be very lucrative as you can be paid four ways -

If you buy below market value (as you always should) you make immediate equity.

If you buy a positive cash flow property you get paid weekly. A positive cash flow property is one where the money you collect in rent is more than the outgoing expenses for the property.

In many countries you can can tax advantages by owning property using depreciation.
You can gain capital growth by buying a fixer upper and renovating. You also get capital growth over time if you buy at the bottom of the cycle.

Factors that affect the property cycle include:
supply and demand
interest rates
migration & population
economic growth
inflation
zoning and planning
what returns are being had in other investments
and confidence which is affected by positive or negative media reporting on property.

When buying investment property never, ever buy on emotion. Emotion IS a factor when you are buying your family home, you have to love it. But emotion has no place in investment decisions. Buying investment property is all about the figures. Never be afraid to walk away from an opportunity as there are always plenty more. Don't buy property at auction as the emotions of the participants often push the price too high. And you don't need to live in an investment property so don't impose your own personal standards on it, your tenants will accept a lower standard of living than you will.

Always do due diligence on any potential property purchase. This includes a building inspection by a qualified builder and also get a pest inspection done. When you decide to buy and you hire a conveyancer to handle the legals always make sure the contract you sign is subject to legal due diligence. That way if your conveyancer finds some legal problem you can get out of the deal.

I recommend you set the following rules for yourself when buying investment property. Buy at a minimum of 10% under market value, only buy properties that are positive cash flow and/or high capital growth, buy properties that can be value added with a cosmetic makeover and only buy houses or blocks of apartments because the land it sits on is what gains value. The buildings themselves depreciate over time.

So how do you find below market investment properties? Look for sellers who are selling because of death, divorce, bank foreclosure, because they are moving and have a deadline or sellers who don't know what they are doing. I'm not suggesting you rip people off but equally you are not their mother, your responsibility is to you, they can look after themselves. If they accept your low offer price that's their business. Hot deals can often be found in the local newspapers, look for words in the ads like urgent, desperate, heavily reduced, well below valuation, transferring overseas, vendor has already bought etc.

Investment property hunting can be a long frustrating business but it's more than worth it. I follow the 100-10-3-1 rule. Look at 100 properties, put offers in on 10, have 3 accepted and buy 1. If you don't review enough properties you will not understand enough about the market values and returns in any particular area to pick a winner.

Whatever you do, be careful trusting real estate agents. Many agents will do whatever it takes to earn their commission check. They often recommend auctions as they shut out other agents, unlike general listings. Always remember agents work for themselves not for you. Be prepared to be knocked, mocked, spoken to in a condescending manner and generally treated as though what you want is unachievable. Buy privately if at all possible.

Do use agents to manage your tenants for you though. Tenants are an even bigger pain in the neck than agents. Also if a tenant does something illegal in your property you as the owner don't want to also be the manager or the police will try to implicate you in the conspiracy so they can seize the property.

The wealthy don't follow the crowd. They buy when shares, property etc are unpopular and cheap after they have identified the future trends based on what is going on in the world around them. The wealthy sell when the crowd wakes up to late and jumps on the bandwagon. The wealthy are contrarian investors. Most investors are afraid to invest in this way because at first they appear wrong. It takes guts to invest this way but you always get the last laugh.

This is why the luxury lifestyle is enjoyed by so few in society. Don't be a sheep, be the wolf. Hunt, don't follow. Seek out the best advice, ask yourself...does this fit into my personal circumstances? If it does then act.

2. Shares

With shares, always employ risk management strategies. Always use stop losses on any investment you make. Decide in advance how much you can afford to lose on any one investment. If your investment drops in value by that amount (I recommend a 15% stop loss in general for shares) sell it. Don't hang in there hoping it will get better. Cut your losses. Not even the best investment gurus get it right every time. Also use position sizing in your investments. Invest the same amount of money in every share investment. If you have $10,000 to invest in 10 companies, then invest $1,000 in each. Don't put more in one company because it appears to be doing better than the others. Don't put too many of your eggs in one basket. These two tips are the basics of all risk management strategies of the successful investor. You can't always win but you can control how much you lose. In the above example if you invest $10,000 in 10 companies ($1,000 in each with a 15% stop loss) and two of your stock picks turn out to be duds you limit your losses to $300.

3. Final advice

If I had to choose the 3 most important things I have learned from the wealthy they would be these.

Don't spend money on depreciating assets until you are spending your interest from your investments. Then you can live a little. Certainly never borrow money to buy depreciating assets.

Limit your losses. Ask yourself what is the worst that can happen. Manage that risk to a level you feel is acceptable then go for it. Stick to your risk management plan when you make a mistake.

Learn from your mistakes and more importantly learn from the mistakes of others.

Happy investing.

High Return Investments - The Investment Millionaires Secret Revealed!

We all want high return investments, but what is the best way to achieve substantial long-term capital growth?

Let's look at the best investment, combined with the most powerful force in investing, and how they can create a high return investment that grows rapidly.

The Secret of High Return Investments

Albert Einstein called this: "The most powerful force in the universe" and investment terms he's right.

Compound interest on an investment with low downside volatility is really the secret of getting high return investments to make huge gains over the long term.

Which is the Best High Return Investment?

When looking at high return investments the best combination is an above average return, linked to low volatility, combined with compound growth.

As an investment, UK land has provided better capital growth over time than most hedge funds, mutual funds, investment trusts, equities, or shares, and with a lower downside risk.

The overall price of farmland has increased by 30% in the last 12 months, and by 130% since the early 1990s, with an average 920% growth in the last 20 years.

The 920% over 20 years is average growth, and many investors have achieved far greater gains by careful plot selection.

Why UK Land is Providing Stunning Returns with Low Risk

UK land provides above average solid growth for the following reasons:

1. Population Growth - The population of the UK in 1981 was 56.2 million. In 2001, the population had increased by about 2.6 million to 58.8 million inhabitants.

2. Immigration - In terms of immigration, there is the granting of entry to the UK, of over 170,000 people per year. This constitutes over 60% of the annual population growth. Therefore, at current rates of growth the UK can expect to see at least an additional 3.4 million inhabitants within the next 20 years.

3. Social Trends - There is a rising divorce rate in the UK. Furthermore, more people are staying single by choice, and getting married later in life.

In the next 17 years, with the rising population and increased lack of affordable housing, the UK will need another 1.5 million homes.

Compounding a Small Sum to a Million!

We can see already that land has had fantastic growth year on year, and looks set to continue. The average gain was 30%, in 2004 alone.

Lets take an example now of compound growth in action:

$50,000 invested with a compound grow of 30% annually would take just 12 years to be worth over $1,250,000!

A steady compound growth soon adds up!

Of course, bear in mind that the above illustration is subject to the fact that investors may use bigger or smaller deposits, and there is no guarantee of 30% annual growth.

To make big gains, the formula for investment success over the long term is:

A High return investment + low downside volatility + the power of compound interest = big capital growth potential

Compound interest makes you money work harder, and as the amount increases, it soon adds up.

For High Return Investments Look no Further than Land!

Land tends to rise steadily in value year on year and with low downside volatility giving steady solid growth

Many hedge funds, unit or investment trusts, can be negative for years on money invested, or even never recover at all!

When considering long-term investments, land with its good growth potential and low downside volatility, makes it the ideal investment to benefit from compound growth

Various Types Of Real Estate Investments

There are several different types of real estate investments and it is important to understand what each type of investment is and what the benefits and risks involved are. The types of investments that involve real estate include Real Estate Investment Trusts which are also known as REITs, real estate partnerships, vacation rental property, rental property, and raw land investments. Each of these real estate investment types has its own advantages and disadvantages.

Real Estate Investment Trusts are companies that sells, buys, manages, and develops land and properties. These REITs are set up as a security that sells on all of the major exchanges just like a stock, and directly invests in real estate by mortgages or property. These trusts get special consideration concerning taxes and they usually offer a high yield and are very liquid compared to other real estate investment types. Individual people can invest in this type of real estate investment by purchasing shares directly on one of the open exchange markets or through an investment broker.

The next type of real estate investment we will look at is a real estate partnership. This is when several individuals partner together and pool their funds and resources for the sole purpose of real estate investment. Investments are made with joint ownership with the other partners in the real estate investment group.

Vacation rental property is one type of real estate investment that provides a rental income most of the time. This type is considered a long term investment, but a big advantage is that you can sell this property and get the value of the property no matter how many years you collect rent for the property. The disadvantage is that as the owner of the property you are responsible for any damage, repairs, and maintenance even if the renter caused the problem. If the problem was caused by the tenant then you do have some remedies available in civil court for the cost of repairs and parts. This investment property is generally rented for short periods of time, and there may be periods of vacancy where there is no rental income from it.

Rental property can be one of the best real estate investment types when it comes to long term income. This type of investment property usually provides a monthly income unless the property is vacant. No matter how long you own the investment property you should get back at least the value of your original investment, and in most cases much more. You collect rent for as long as you own the property without your investment ever losing value, so the monthly income minus expenses is a lot like a very high interest payment. Raw land real estate investment is when a person or company invests in raw land and then makes a profit off of the natural resources of the land or develops the property.

No matter which real estate investment type you choose, you should be aware of all the advantages and disadvantages for the type you are planning to invest in. Do the research and make your investment plan, including which types of real estate you want to invest in. Do your homework before investing and you will never be sorry afterward.

Learn From Your Investment Mistakes

Every one makes investment mistakes. From the time we were born, we learned from the mistakes we made. As investors, we need to learn from our investment mistakes by recognizing when we make them and make the appropriate adjustments to our investing discipline. When we make a losing investment, do we recognize our investing mistake and learn from it, or do we attribute it to some outside factor, like bad luck or the market? To make money from your investments and beat the market, we must recognize our investing mistakes and then learn from them. Unfortunately, learning from these investing mistakes is much harder than it seems.

Some of you may have heard of this experiment. It is an example of a failure to learn from investing mistakes during a simple game devised by Antoine Bechara. Each player received $20. They had to make a decision on each round of the game: invest $1 or not invest. If the decision was not to invest, the task advanced to the next round. If the decision was to invest, players would hand over one dollar to the experimenter. The experimenter would then toss a coin in view of the players. If the outcome was heads, the player lost the dollar. If the outcome landed tails up then $2.50 was added to the player's account. The task would then move to the next round. Overall, 20 rounds were played.

In this study there was no evidence of learning as the game went on. As the game progressed, the number of players who elected to play another round fell to just over 50%. If players learned over time, they would have realized that it was optimal to invest in all rounds. However, as the game went on, fewer and fewer players made decisions to invest. They were actually becoming worse with each round. When they lost, they assumed they made an investing mistake and decided to not play the next time.

So how do we learn from our investing mistakes? What techniques can we use to overcome our "bad" behavior and become better investors? The major reason we don't learn from our mistakes (or the mistakes of others) is that we simply don't recognize them as such. We have a gamut of mental devices set up to protect us from the terrible truth that we regularly make mistakes. We also become afraid to invest, when we have a losing experience, as in the experiment above. Let's look at several of the investing mistake behaviors we need to overcome.

I Knew That

Hindsight is a wonderful thing. As a Monday morning quarterback, we can always say we would have made the right decision. Looking again at the experiment mentioned above, it is easy to say, "I knew that, so I would have invested on each flip of the dice". So why didn't everyone do just that? In my opinion, they let their emotions rule over logical decision-making. Maybe their last several trades were losers, so they decided it was an investing mistake and they become afraid to experience another losing trade.

The advantage of hindsight is we can employ logic as we evaluate the decision we should have made. This allows us to avoid the emotion that gets in our way. Emotion is one of the most common investing mistake and it is the worst enemy of any good investor. To help overcome this emotion, I recommend that every investor write down the reason you are making the decision to invest. Documenting the logic used to make an investment decision goes a long way to remove the emotion that leads to investment mistakes. To me the idea is to get into the position where you can say "I know that" rather than I knew that. By removing the emotion from your decision, you are using the logic you typically use in hindsight to your advantage.

Self Congratulations

Whenever we make a winning investment, we congratulate ourselves for making such a good decision based on our investing prowess. However, if the investment goes bad, then we often blame it on bad luck. According to psychologists, this is a natural mechanism that we, as humans possess. As investors, it is a bad trait to have as it leads to additional investing mistakes.

To combat this unfortunate human trait, I have found that I must document each of my trades, especially the reason I am making the decision. I can then assess my decisions based on the outcome. Was I right for the right reason? If so, then I can claim some skill, it could still be luck, but at least I can claim skill. Was I right for some spurious reason? In which case I will keep the result because it makes me a profit, but I shouldn't fool myself into thinking that I really knew what I was doing. I need to analyze what I missed.

Was I wrong for the wrong reason? I made an investing mistake, I need to learn from it, or was I wrong for the right reason? After all, bad luck does occur. Only by analyzing my investment decisions and the reasons for those decisions, can I hope to learn from my investing mistakes. This is an important step toward building genuine investment skill.

Top Tips For Successful Investing

Financial investment is a big decision, and one that should only be made once you know and understand all the facts and possible risks. So what are some top tips for successful investing?

Before you invest any money, you should first evaluate whether you're in a financial position to do so. For instance, do you have surplus funds to invest, or would investing put your emergency funds at risk? It's always worth remembering that emergencies do occur - so you'll want to ensure your investment moves don't jeopardise any money you've put aside specifically for this purpose.

Once you've established that you're in a financial position to invest, think about what level of risk you're comfortable with. Perhaps you have a more cautious attitude towards risk; or, maybe the availability of your funds will determine your level of risk for you. Either way, determining your level of risk is a big part of investing. Remember that you can also limit your exposure to risk by spreading your money across different types of investments, rather than placing a larger sum on a single investment.

On a similar note, you'll want to decide what kind of return you want from your investment. This entails determining how long you want to invest for and what you want from your investment - whether it's growth, or the ability to withdraw funds from your returns.

Next, you'll want to consider your investment options and thoroughly research each of them. For instance, if you want to invest in a particular fund, it' a good idea to check the financial press and various financial websites for information and news regarding the company behind the fund. However, it's also important to remember that a company's past performance is not a good indicator of future performance - so, simply because a company has done well in the past, doesn't mean it will do well in the future.

Once you're confident that you want to invest in a specific fund, there are a few more points to consider. First, you'll want to familiarize yourself with the style of your chosen fund. Some funds are actively managed, where fund managers make decisions about the investment; while other funds are passively managed - where the fund is organized to match the performance of a specific share index. Make sure you're comfortable with the style of the fund before you commit to the investment. Next, be aware that all funds attract charges and unique tax terms - so you'll want to make sure you're getting value for money after charges are made, and that you're investing on a tax-efficient basis. If you're investing with an adviser, find out in advance how much you'll be charged for advice.

Once you've actually invested money, it's important that you keep an eye on your investment. Whether it's through the financial press or any of the numerous financial websites, knowing how your investment is doing can help you make appropriate decisions regarding your investment in the future. Be aware, however, that the value of your investment may go down as well as up. The fund value which is available to provide benefits to you at retirement may be less than the full amount of the payments you have made. The rate of growth of funds cannot be guaranteed and past performance is not a reliable indicator of future performance.

Last but not least, seek financial advice from a qualified investment professional before and throughout your venture - particularly if you've never invested before. An adviser can inform you on what the whole process entails, as well as offering advice on how to invest your money, and can even help you determine if it is right for your circumstance.

This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.

How to Start Real Estate Investing and Hit the Ground Running

We want to discuss six real estate investing tips intended to help anyone just getting started in real estate investment to successfully launch an investment real estate business and hit the ground running.

1. Develop the Correct Attitude

Foremost, if you are to succeed at real estate investing, you must understand that real estate investment is a business, and you become the CEO of that business.

It's crucial, then, as your first order of business, to develop the correct mind-set about investment real estate and be able to make the following distinction between buying a home and investing in real estate:

"You buy a home to live and raise a family; you buy investment property to pay for the home, live comfortably, and raise your family in style"

As one investor put it, "Only women are beautiful, what are the numbers?"

In other words, to invest in real estate successfully you must acknowledge that it's not curb appeal, amenities, floor plan, or neighborhood that should turn you on or off to the investment opportunity; that what counts most is the property's financial performance.

2. Develop Meaningful Objectives

A meaningful set of objectives that frames your investment strategy is one of the most important elements of successful investing. Stay realistic. Yes, we all desire to make millions of dollars from our real estate investment property, but fantasy is not the same as expressing specific goals and a method on how to achieve it.

Here are some suggestions:

How much cash can you invest comfortably? What rate of return are you hoping to generate? Are you expecting instant cash flow, looking to make your money when the property is resold, or merely looking to achieve tax shelter benefits? How long do you plan to own the property? What amount of your own effort can you afford to contribute to the day-to-day operation of running the property? What future net worth are you hoping to achieve by investing, and by when? What type of income property do you feel most comfortable owning, residential or commercial, or does it matter?

3. Develop Market Research

As a novice to real estate investing, you probably know little about income property in your local market. So, do market research to learn as much as you can about income property values, rents, and occupancy rates in your area. The better prepared you are, the more likely you are to recognize a good (or bad) deal when you see it.

Here are some resources to check out:

(a) The local newspaper,
(b) A local appraiser,
(c) The county tax assessor,
(d) A qualified local real estate professional,
(e) A local property management company

4. Run the Numbers

Calculating the property's cash flow, rate of return, and profitability is crucial to a successful real estate investment business. As the CEO you've got to know what you're buying, especially if you're trying to determine which of several investment opportunities would be the most profitable.

You have two options:

• Invest in real estate investment software. This will enable you to discover for yourself the rental property's cash flow and rates of return, and create your own analysis reports. Plus, by running the numbers yourself, you gain a broader understanding of real estate investing nuances, and in turn might be less likely to fall victim to the wiles of someone with little concern about how you spend your money.
• Work with someone who owns real estate investment software and can run, present, and discuss those numbers with you.

5. Develop a Relationship with a Real Estate Professional that's Qualified

Getting to know a qualified professional is a great way for beginners to get started with investment property because an astute professional can acquaint you with local market conditions, recommend a property that meets your investing objectives, and discuss strengths and weaknesses about specific property performance.

Just be certain, however, to work with a real estate person who understands real estate investment property.

Be sure the agent has a firm grip on key financial measures inherent to real estate investing, knows how to measure profitability and rate of return, has the ability to present the data you need to make wise investment decisions, and, most importantly, shows a genuine interest in how you spend your money. The last thing you want to do is to get involved with an agent that would throw you under the bus just to make a commission.

Here's a good way to interview for an agent. Ask about cap rate, cash-on-cash return, and then request an APOD or Proforma Income Statement. If they stand there looking at you like a deer into the headlights of a car in response to even these basics, find another agent.

6. Start Investing

That's it, it's time for you to get started. Here's to your real estate investing success.

Getting Started With Investing

Introduction

Traditionally investing has been seen as the preserve of the wealthy and has a reputation for being a minefield to the uninitiated. As western standards of living continue to increase, more and more people are beginning to realize the benefits investing even small sums can bring. This article seeks to explore some basic principles to help you get started with investing.

1. What's the basic premise of investing?

The Collins English Dictionary defines the word invest in the following way; "To lay out, for profit or advantage." To layout refers to the fact that something of value is needed in the first place in order to generate more wealth. In essence investing is a means of taking a pre defined sum of money and using it in such a way as to increase its original value, therefore generating a profit.

2. Why Invest?

This is one of the most fundamental questions that any person looking to invest needs to ask. The general answer is pretty obvious, to generate a profit, but the reason behind the investment are far more important and will directly influence how and where you chose to invest. In addition the answer will also determine the level of risk you are willing to expose yourself to and which will be explored in more detail later.

Reasons as to why people invest are varied and may include some of the following; to build up a nest egg for retirement, to provide a financial safety net, to pay for future education or university fees for children, for fun because of the buzz investing can create.

3. How Should I invest?

This is also a deeply personal question and will depend upon the amount of money an individual has at their disposal. It is important to stress that investment takes many different forms all of which facilitate differing levels of investment. A single mum might decide to invest $20 or a business entrepreneur $1 million but both will seek a return on their capital outlay and how they go about achieving their investment goals may differ substantially.

4. What level of risk should I expose myself to?

Such a decision is very important as ultimately it will dictate the profitability of your final investment. In many respects this question will also be determined by the answer to the previous question, why invest? If an investment is being made to safeguard a financial future the level of risk taken may be lower than an individual investing for fun.

Generally investments are made in three distinct categories low, medium and high. Low risk investments include Government bonds and savings accounts. Medium Risk investments could include certain types of shares or property. High Risk investments will almost certainly include shares in rapidly expanding companies exploring new markets. The dot.com crash in the late nineties, in which thousands of newly established technology companies went bust, is an example of a high risk investment going very wrong.

What types of investment are there?

This is not an easy question to answer because in theory anything that earns a profit from an initial outlay can be classed as an investment.

There are however some common forms of investment that deserve further explanation.

a) Government Bonds

These are deemed low risk investments as money is invested in Government related projects and assets. It is unheard of in the western world for a Government to go bankrupt.

b) Shares

This is a means of holding a stake in a company trading on the stock exchange and investors benefit from its profitability. Whilst share dealing can be low risk particularly if you are investing in established companies in the FTSE 100, most share investments are deemed medium or high risk. This is because such investments have the potential to return excellent profits but there is also a raised risk of losing your total investment.

c) Antiques

Antiques are often a great source of investment given that they hold their value at the very least and have the added benefit of being easy to sell if you need a quick cash injection. In addition if you wish to leave a sum of money to family after your death they won't be hit with inheritance taxes often associated with large amounts of physical cash. Perhaps one of the major drawbacks to investing in Antiques is the requirement of a level of technical expertise, or access to those skills, to ensure that suitable items are invested in.

d) Property

Property can also be a very lucrative source of investment as property prices continue to increase across the developed world. Generally property prices increase in value in the long term.

e) Savings

Whilst banks often make the distinction between savings and investments, in essence savings are a form of investment as the money you save with the bank is invested in low risk shares on your behalf, which ultimately enables financial institutions to make interest payments to you.

How to invest

Now that you have more information to help you get started with investment the next step is to speak to an independent financial advisor. These consultations are almost always free and you can get specific advice tailored to your individual needs concerning investing. In the UK there is an excellent site for finding Independent Financial Advisors called unbiased, see the link at the end of this article

Summary

This article has attempted to provide advice to enable individuals to get started with investment. Discussion has taken place about the basic premise of investing and the profitability of such a decision, along with examining different reasons for investing. Attention has also been given to how much might be invested and at what level of risk this might be undertaken at. Finally we have explored the vast array of investment options available and what the next step is for a budding investor.