The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.
One of the first things to think about when it comes to investing is what you want to achieve from doing it. Sure, we’d all like to be swimming in Olympic size pools full of cash but let’s get a little more realistic and take a quick look at an early strategic decision you’ll have to make about the way you invest. Ultimately – Investing in its simplest form, can be split into two categories: income investing and growth investing. Each one comes with its own unique level or risk and opposing outcomes. Let’s take a look at them in more detail…
As you might expect, income investing means focusing on stocks or other investment products that are likely to deliver a regular income by way of a dividend (a dividend is a payment made to investors by the company they have invested in). This means that whilst it might be tempting to search for a stock that has the potential for explosive growth, what you actually need to focus on, is larger, more stable investments. These investments can include dividend paying stocks and bonds and also dividend funds and even P2P lending.
Many people look at income investing as a form of passive income. It is possible to build up a portfolio that allows you to earn regular income and you can start with a sizeable lump sum or with a small amount of money and slowly build your portfolio to a point where you start to see real results. Income investing is relatively low risk and the idea behind it is to create a revenue stream that can eventually be lived on whilst you retain a basket of investments that at the very least hold their value or better still, slowly increase their value over time.
By contrast, growth investing is designed to help you build up a nest egg. Rather than looking for investments that will provide a regular cash stream, you’ll need to look for investments that are likely to grow significantly over a relatively short period of time. Where income investing is focused on creating an income stream that can be used to meet your living expenses now – growth investing is used to amass capital that can be put to good use later down the road without any pay-outs in the interim.
Growth investing requires you to choose investments that are likely to see dramatic growth in the coming years. Small cap stocks are sometimes considered growth investments. Some commodities, currencies and other investments that can result in big gains are looked upon as growth investments. The thing to remember about growth investments, though, is that they are considered to have a higher risk than many income investments. The chance of significant growth also comes with the chance of big losses.
To understand which strategy is best for your needs and to identify investment products that match these strategies, speak to a member of our team today. You can contact us on 020 7562 5858 or email email@example.com. We’d love to hear from you.