Sunday, July 25, 2010

Why invest your money

Investing and finances independence means something different to everybody: being able to retire at 50, setting up your own business, paying the mortgage, writing a novel or traveling the world. To achieve your goals consider how much you will need, and then think about how you can invest your money to help you achieve these goals.

There are a few different strategies to invest your money, this article will look at 2, investing for capital growth or investing for an income.

Investing for capital growth

Capital growth occurs when the value of your investment increases. Most people invest for capital growth to build their wealth over time and protect themselves against inflation.

Investing for income

People can seek an income stream from their investments in order to supplement their primary source of income. Many retired people live off the income from their investments (e.g. dividends from shares and rent from property). Fixed interest products such as bonds and hybrids offer a potentially regular income stream.

There are some investment strategies that will give you capital growth and regular income. An example is properties. In the long term property values generally go up in value. If you are investing in properties and you have tenants you will also have rental income. Properties therefore have the potential to give you income and capital growth.

Before investing, think about your short and long term objectives and devise a strategy to support you in achieving your objectives.