Optimism has found its way back to the economic climate as the landscape is currently shifting towards improvement. With a potential pension crisis in nations such as the UK having been avoided and unemployment continuing to fall, citizens now have greater volumes of disposable income to save. In addition to this, there are a number of initiatives being introduced to educate people on the importance of saving and help them to make the most of their capital.
The relatively robust nature of the global economy raises another issue, however, especially as citizens look to make the most of their money while sentiment remains high. More specifically, it is worth questioning whether the traditional methods of saving are adequate in the current climate, especially as interest rates have continued to fall steadily since the days of the great recession. With this in mind, it may be worth considering more innovative and progressive investment options to help build your wealth. For example:
1. Invest in Managed Trading Portfolios
Outside of traditional savings accounts, one of the best platforms for generating fiscal returns is the financial marketplace. The issue is that this remains a vast, diverse and decidedly complex entity, stocked with everything from variable derivative products to fixed shares and commodities.
It is therefore extremely difficult for those without any experience of investment to achieve success in the financial marketplace, even if they have studied specific sectors in-depth. This is why beginners should look at investing in a managed trading portfolio, where you are simply required to tell a service provider how much you wish to invest and your preferred level of risk. From here, your service provider will oversee the investment of your funds into a variable combination of corporate bonds and equities, while also offering in-depth advice on your portfolio and potential returns.
Nutmeg remains one of the leaders in this market, and companies of this type tend to work in partnership with a reputable banking institution. Returns will vary from between 5.5% and 30% depending on your appetite for risk, although you must also be prepared to lose some of your capital if you decide to chance higher returns. To begin with, you may want to open one or two medium risk accounts and invest a percentage of your savings to see how you perform.
2. Go it Alone With Bonds And Precious Metal Investment
If you do decide to be courageous and go it alone as an investor, you will need to focus on developing a simple and diverse portfolio that minimises risk. This will help you to achieve consistent returns, while also negating any potential volatility that characterises all financial markets.
Bonds are usually a staple of any stable investment portfolio, as they offer consistent returns over a period of three to five years or more. They also offer considerable diversity, as there are a number of bonds from corporate and government backed entities to those associated with retail. The only issue with bonds is that their value tends to fall when interest rates rise (usually during times of economic growth), which immediately undermines their appeal given the forecasts for continued prosperity.
The same principle applies to precious metal commodities such as gold and silver, which typically gain in value during times of economic austerity. This became clear during the recent great recession; while the stock market lost an estimated 50% of its value, gold experienced a huge price hike from $600 per ounce in 2007 to a peak of $1,900 in 2011. As a result, inexperienced investors are less inclined to invest in these outlets due to the robust economic growth forecast.
This is an oversight however, as historical data reveals that the average yield for both bonds and precious metals has risen consistently over the course of the last 20 years. So even allowing for short-term fluctuations, those with a longer-term outlook can secure a return on their savings. This is particularly true with bonds; while rates are expected to rise by between one or two price points next year, the potential yield over the next three years will more than compensate for this.
So if you do create an individually managed portfolio where you invest in both secure binds and precious metals, you should manage your expectations and create a long-term strategy for between three and five years.
3. Embrace Local Crowdfunding Opportunities
While crowdfunding is a concept that has existed for a decade, it is only recently that aspiring investors have been able to choose from a competitive range of platforms. Trail-blazing companies such as Kickstarter and IndieGoGo dominated the crowdfunding market historically, offering access to global investment opportunities and international start-up projects.
The increased diversity within this market has made it more accessible to investors, while it has also simplified the process of sourcing suitable and locally-based opportunities. Take the fast-growing resource Crowd Cube, for example, which is a UK based funding platform that introduces investors to some of the most exciting start-ups throughout Britain and Ireland. This instantly provides reassurance to novice investors, while it also enables seamless contact between them and the companies that they choose to back.
Returns vary depending on the company in question, although Funding Circle recently reported an average yield of 8.3% across all of its investments. Crowd Cube also offers investors either a fixed interest rate or an equity share in their chosen business venture. The level of risk is also considerably higher than investing in a managed trading platform or bond, so you will need to conduct independent research on any companies that you are looking to back and the entrepreneurs behind them.
It would also be advantageous if you invest in a market where you have some existing knowledge and experience, as this will enable you to make an informed decision.
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These investment options offer a viable alternative to traditional savings accounts, especially in a growing and prosperous economy. If you have any additional advice for aspiring investors or individuals who are looking to make the most of their money, feel free to leave your comments below!