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The Savvy Scot

Personal finance and lifestyle blog

A Lot of People Need Investment 101

By Pauline

 

A Lot of People Need Investment 101

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Polls of adults all over the world reveal that people have all kinds of perceptions about what makes the best investment strategy. Using a recent poll by Lottosend, we can make some general observations about what people think about investment, though we’ll have to guess about why. Here are some takeaways from this interesting UK survey, where people were asked what they thought the best investment form way:

Investment Type / Percentage

Property Investment / 33.40%

Tax free ISA allowance / 32.70%

Investing in Stocks and Shares / 11.60%

Inves­tment Trusts / 8.20%

Asset Inves­tments / 6.70%

Unit Trust or OEIC / 4.10%

Tracker Funds and ETFs / 3.40%

With so many different investment forms represented in this list, it’s easy to see that there’s certainly no unity of opinion on this matter. What this analyst found surprising (though perhaps not, if you think about it) is that property investment was number one. Property investment, depending on who you talk to and how you do it, may not even be considered an investment by some. Some people argue that because owners of property have to perform maintenance upon their properties, and because the value fluctuations in each individual property are related to issues which are beyond the control of the property owner, this cannot be considered a proper investment. This analyst isn’t in this boat, exactly, but I would never recommend that people invest in property at the expense of other investment forms, like ETFs held in a Roth IRA, traditional IRA, and/or 401(k). ISAs fill this role for European investors.

As you can see from the chart above, ETFs don’t make the list until the very last entry, with just 3.4% represented. It’s possible that people simply don’t understand what ETFs are, which is why they’re worth a little review in our call for Investment 101. ETFs are individual shares of mutual funds. Rather than having to buy up specific amounts of more expensive mutual funds, these funds are essentially divided up into shares, which can then be simply purchased as shares in portions that are easy to understand. It’s cheaper and easier this way.

ETFs, available through investment sources like Vanguard and Betterment, one of the safest ways to invest in the stock market. Stocks are notoriously difficult to pick. Individual stock pickers frequently end up in the hole, just as much or more than people who bet on horse races. This is because things rarely go to plan in the stock market. Though the overall market has a tendency to grow, it does so according to the success of an unpredictable array of stocks. The top-performing stocks can be bound up together in an index, which is the basis for their inclusion in mutual funds. ETFs are just a simplification of the mutual fund buying process, which saves a little money and trades just like a stock. In fact, it’s one of the most reliable investments of all, relative to risk and reward alike, and most investment advisors would hope that it would top the chart, not barely make it on at the end.

Filed Under: Money Tagged With: investment

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