Buying a property is an essential milestone in a person’s life. Unfortunately, though, it’s getting more and more difficult to become a first-time buyer. In fact, in February 2021, house prices jumped 2.1%, the largest national rise in almost two decades, while wages stayed stagnant and unemployment remained high.
What can you do if buying a home of your own seems like a far-off fantasy? You could consider investing your money to help you save for a house deposit. Or, consider rentvesting alternatives like passive income investing via Airbnb to help save up for a house.
What investment options are available to you?
With a number of different investment opportunities for you to choose from, you can build up your money in a way that makes sense for you. Just remember that all investments carry some level of risk, so make sure you do your research before diving in headfirst. Here are some ideas to get you thinking.
1) Fixed-income investing
Fixed-income investments offer plenty of potential benefits, including certainty of income, capital preservation, and stability. They involve an investor buying a bond from a company, which helps that company raise money for their balance sheet.
The company will then pay the investor interest at a fixed rate over a set number of years until the bond matures and the debt is paid back in full. However, there are risks involved. Interest rates could cause price volatility, while the bond issuer’s credit could cause it to default on its debt obligation.
Instead, you could opt to buy shares, which is most commonly done through an online brokerage service or a full-service broker. Employees are also sometimes given the opportunity to acquire shares in the company they work for.
When you buy shares, you basically buy a small portion of a company. However, it is advised you invest in a variety of shares and build up a share portfolio rather than put all your cash in one company if that company declines in value.
3) Managed funds
If you opt to invest in a managed fund, your money will be pooled with that of other investors and managed by a fund manager, who will buy and sell shares for you.
As some shares are not available to individual investors, you have more opportunities to invest in a more diverse range of assets when you pool your money. It is also possible to start small with your investment and increase over time. Just remember that the more you put in, the more you will get out when earnings are divided between investors.
4) Listed investment companies
Similar to managed funds, listed investment companies (LICs) are managed by an internal or external manager. But, LICs are incorporated as companies and listed on a stock exchange, so investors own shares in the company rather than a portion (units) of a fund.
Another major difference between a LIC and a managed fund is that LICs are “closed” investments, meaning that the amount of shares available does not change.
5) High-risk investments
If you decide to invest in a smaller company or one that’s struggling to find institutional investors, this is called a high-risk investment. Because of how uncertain the future of these companies and similar high-risk assets are, with a high-risk investment there is a higher chance that you won’t receive your payments on time or if the company really is struggling at all.
One major benefit of high-risk investments is that investors can make good money quite quickly. However, it is also very possible to lose money fast, too.
What investment opportunity should I choose?
If you want to accumulate enough money to buy your own home, then investing might just be right for you. But, it’s important that you never go into an investment opportunity blind, either to its potential benefits or its risks.
Do your research before putting down your money, and decide how much you’d ideally like to make in how long. Some investment options will likely be better suited to your situation than others.