Investment is not just saving money in your bank account. As deposit rates are low we need to invest our money to generate higher returns to overcome inflation. For most individuals, shares are the most common type of investment which enables them to gain higher returns on their savings. One benefit to investing money is due to capital growth, this is the way shares can make higher returns.
As we invest money into a business and its profits grow our investment value grows too, also known as capital gains. The dividend yield is another advantage to investing money as shares can make us revenue when invested. Companies who make a profit can choose to reinvest or pay dividends, we look for companies who pay these as we can reinvest and make more shares. Another reason to invest is that we can purchase or sell shares whenever we want, this can be done reasonably quickly through online trading services. This process is also known as liquidity.
Basics of investment
Firstly, an important type of investment product is stocks, these are dividends and capital gains as seen above, also voting rights where shareholders have the right to vote in general meetings of the company they invest in and have control over board members and implement management. Another type of investment product is bonds, these create a predictable income stream where investors know how much income they will receive and how often they will revive their income.
Also, bonds create lower potential returns as bonds are safer and more trustworthy than other assets. It is also important for individuals to know about stock analysis before investing in a company, this is when an investor study’s the data to determine if a company is worthy or not to be invested in and there are two main techniques to carry this out. Firstly, fundamental analysis looks at the data of businesses and helps those potentially investing decide if the company is worth more than presented.
Another type is a technical analysis which involves potential investors analyzing the businesses’ past market activity, prices, and profits in order to see where the future of the company is leading to and work out the future stock price, usually done by those who are interested in investing for a short time.
How to start investing
In order to start investing an individual needs to start with two accounts: a CDP account and a trading account. A CDP account is also known as a central depository account helps keep the shares you have bought safe and protected. A trading account on the other hand needs to be opened before your first investment as it allows an individual to buy and sell shares. Over time investors can open as many trading accounts as they please and come with different brokers which help manage your account. Brokers can help to set up these accounts as long as you are eighteen years old and have never been bankrupt. More information can be found at https://beeksgroup.com/network/data-centres/sgx-singapore-sgx/