Finance

Beginner's Guide to Saving and Investing

27 December 2021By Oliver Maher
iStock/lankogal

Written by

Oliver Maher

Oliver Maher is a director at United Advisers Marine. Disclaimer: UA/BFMI is a member of Nexus Global and an appointed Representative of Blacktower Financial Management (International) Limited (BFMI). BFMI is licensed and regulated by the Gibraltar Financial Services Commission (FSC). UA/BFMI are not tax advisers and clients should always seek independent tax advice for their individual circumstances. +34 871 115 928; www.unitedadvisersmarine.com

Do you have money left at the end of the month? Unsure of what you should be investing in? You’re not alone. The world of investment can seem daunting at first. Here we answer the most common questions our yachting clients ask us.

What are the main types of investments?

Investments are normally broken into four core categories: property, cash, bonds, and shares.

Most savers start with cash. It’s recommended to keep three months’ salary as cash savings. While you’ll earn less on this money than if it were invested elsewhere, you have total flexibility over withdrawals. This is your emergency fund.

Property is often where people look next. In certain areas, property investment can be a solid bet, especially if you’re looking to move to a land-based role in the coming years.

Bonds (aka fixed-interest securities) are a way of securing returns through lending your money to a company or government. Government bonds have traditionally been a stable way of investing cash. Company bonds have higher risk and often reward you with higher returns.

When thinking about shares, don’t think of The Wolf of Wall Street. Think about a stable return over a long-term investment. Share prices do fluctuate. So, you need to be prepared that they might have lower value when you cash them in.

There are additional ways that you might invest your money: collectibles (e.g. luxury items such as watches and handbags), currency (where you use the exchange rate to your advantage), and commodities (palm oil, corn, or gold).

What is a portfolio?

A portfolio allows you to invest in multiple asset types. For example, you might want to invest 10 percent of your investment sum in high-risk assets, 20 percent in property, and 70 percent in bonds to spread out the overall risk.

What am I likely to get back on investments?

All investors are interested in their returns, and these come in different forms, depending on how you have chosen to invest your money.

  • Shares pay out dividends
  • Interest from cash investments
  • Bonds return yields
  • Rent is paid out for your property
  • Lump-sums pay out when you sell your shares (if you make profit)

Why should I start investing?

Investments have a cumulative effect: This is a simplification of compound interest, but that’s how it works if all other factors remain stable. It generally pays to invest in your pension early or pay off your mortgage sooner. Interest earns more interest. This is bad for your mortgage and great for your investments.

It’s better to start to put away a small sum regularly sooner rather than wait for your next pay increase to invest a larger sum in two to three years.

This article originally ran in the October 2021 issue of Dockwalk.

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