Ever fancied yourself owning a business?
An actual business that makes and sells stuff or provides a service and you get to receive a share of the income and benefit from its growth.
Better still, how about owning a business where you don’t have to do anything? You just sit back and let some of the brightest minds in the world run it for you.
Businesses that you probably pay money to every day for using their goods and services. Why not get something back?
Well, this is exactly what you can do when you become an investor in the stock market.
When you buy shares in a company listed on the stock market, perhaps through your ISA, LISA or pension you are owning a piece of that company.
Yes, it will likely only be a tiny piece of that company but you’re still an owner of it nonetheless.
You will receive a share of the profits the company produces by way of dividends. This is money paid out directly to you or can be re-invested to buy more shares.
You will hopefully also find that the price of your shares grows over time as the company increases its profits. This will mean the money you have invested has grown.
The beauty of investing these days is that you can own some of the greatest companies in the world. Think Apple, Microsoft, Amazon, Shopify and many more.
But what if you choose the wrong company? What if the company you invest in and own doesn’t do so well? That is always a risk. Even companies that have been some of the biggest in the world can eventually lose their way and become worthless.
Luckily, nowadays you don’t need to make the choice of which individual company you should invest in. You can own many businesses by investing in a fund.
An investment fund such as a Unit Trust, Open Ended Investment Company (OEIC), Investment Trust and Non-UCITS Retail Schemes (NURS) are all readily available inside most ISAs, LISAs and pensions. Some products will offer more choice of funds than others.
Instead of owning shares directly in a business you own units in a fund which owns the shares of the businesses it invests in.
These funds will typically invest in between 50 and 100 companies. So, it’s a great way to reduce your risk by diversifying your investment across lots of different businesses. If one or two of these businesses were to go bust it wouldn’t have a massive impact on your investment as the fund would still hold many other businesses.
You also get to benefit from the expertise of a fund management company that will employ teams of people and spend a lot of money researching and monitoring companies to try and pick the best investment opportunities.
So, all you need to do is look at what type of businesses a fund is investing in and whether they fit with your objectives and beliefs.
The type of funds you can invest in is vast.
You can invest in funds that:
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- Focus on businesses from a specific country.
- Only hold businesses from certain sectors of the economy like technology companies or financial companies.
- Have certain ethical standards meaning they promote good governance, are socially responsible and use/produce green energy.
Now, there will be times along your investment journey where the world doesn’t seem right and there is lots of negativity around the economy.
Fear will cause people to sell their units in their fund and this will cause the value of your investment to fall.
Providing you have a collection of great businesses, run by brilliant minds, solving the world’s problems, the falls will only be temporary.
There has never been a permanent decline in the stock market. Over the long term it has only ever advanced.
Yes, there will be blips along the way but if you are confident in your investment choices and you remain patient, you can ride the waves to great wealth creation.
Why not start your business empire today and actually own and make money from the companies that you buy from every day?
Carl Roberts, Director
If you want to learn more about this topic, please find the link here.
More information about our fund the YFS Intelligent Wealth Fund can be found here: Hargreaves Lansdown or AJ Bell
Risk warnings
The value of investments and the income derived from them may fall as well as rise. You may not get back what you invest. This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action. All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs practice. Levels and bases of tax relief are subject to change. This blog is based on my own observations and opinions.
