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Summary
- There are several factors to consider before choosing an investment, such as investing goals, time horizon, risk appetite, outstanding debt and more.
- Some of the financial instruments which have historically given high returns include stocks, commodities, property, derivatives markets etc.
As the UK economy slowly emerges out of a period of pandemic induced low economic activity, investors are increasingly seeking opportunities to park their funds in ways that will offer them the best return on their investments.
Before Investing
There are a few things one must consider before investing in any type of financial instrument. Investors must first ensure any of their surplus funds is used to clear any outstanding debt before investing. They can do this by identifying which debt has the highest interest charge and work towards paying it off.
Following this, investors must ensure they have clear long term, medium term and short term goals with regards to their investment. Long term goals can have a time horizon of over 10 years, while medium term and short term can range from 5 to 10 years and less than five years, respectively.
Factors such as risk appetite, investment strategy, transaction fees and others also play a role in deciding upon which type of investment is most suited for a portfolio.
Also Read: What Are the Best Investments in the UK?
Which investment has the best return?
There are several types of investments one can choose to invest in depending upon their goals. Some of them include stocks, bonds, derivatives, funds, real estate, government or sovereign bonds, start-ups, commodities, and more unconventional investments such as art, wine and more.
However, for higher return investments, there is usually a greater risk trade-off associated with them. Diversification is the key to ensuring returns are maximised while ensuring a significant amount of risk is hedged across various baskets of financial instruments.
Stocks
The stock market has historically proven to be one of the higher performing return on investments over a long period of time.
Also Read: How Do I Buy Shares in the UK?
High yield Bonds
Unlike stock prices which are more volatile, bonds are relatively more stable. However, high yield bonds can be attractive in comparison to government bonds which typically offer lower interest rates.
Investors must be cautious if some bonds offer returns of 15 to 20 per cent as they can be junk bonds.
Options
Investing in the options market can be another way to investors get a higher payout, but it is highly dependent on how well they can time the market. It is a more risky investment.
Commodities
Real estate investment trusts (REITs), gold and oil, can also offer high returns. Gold prices touched an all-time high recently due to investors flocking to the safe haven asset amidst the uncertainties related to the pandemic.
Property
The housing market is currently undergoing a mini-boom amid the lockdown. Investing in property is considered a good long-term investment, which appreciates in its value over a long period of time. However, for investors who seek highly liquid investments, properties may not be the right investment choice.
Overall, depending on the investment goals, risk appetite and investment portfolio, there can be several different assets that can provide high returns to investors.
