I guess many people would think the only reason for investing into things such as stocks or property would be for financial gains. Whilst I don’t disagree that this is one of the main reasons for investing I think there is more to it than that after all you will generally achieve gains in a savings account, even if the rewards are small. I will come back to the other non-financial reasons for investing in stocks and property in a future post.
So for most of us the primary aim is to make money and more specifically to make more money than if we simply left the investment in the bank. Whilst it is possible to make considerable returns through the stock market or property it is also possible to lose a lot too. I think it is the fear of the potential losses that stops many people from investing in the first place. However, with a little education, it is possible to a least minimise the likelihood and the size of any losses. Furthermore, if you get it right, the returns from stocks and property investments can dwarf those from regular high street options.
How much you can make will vary depending on the strategy you choose. For example if are you choosing stocks which pay regular dividends, then there will be a small percentage yield each year of maybe 5% plus there would also hopefully be a capital gain in the share price. Any capital gain would depend on the performance of the company and most importantly the price paid for the stock. It is very important not too overpay for stocks. If you pick companies in the development stages then they would likely not pay dividends. This would not matter though as they would be short to medium term investments and the gain in share price is what matters here.
In the world of property, it is possible to have much the same aims as with stocks. Rental incomes can provide yields in the region of 5% and property prices in general tend to increase. Also redeveloping and renovating properties can provided short term capital increases. The only issue with property is that it requires more management than stocks as it either requires renting out or building work. Shareholders have relatively little to do other than occasionally check the prices of stock to see whether it may be a good time to sell. Another advantage stocks have over property is diversification. For the price of a deposit required on a single property, shares could be bought in a number of companies in different sectors. This would help to provide a more stable portfolio.