Why do people invest their money?
In short, people invest their money in shares, real estate, financial schemes or commercial ventures with the aim of growing their money over a period of time. Given the extremely low current interest rates on traditional savings accounts offered by banks, it’s easy to understand why people may wish to invest their money instead.
You may be torn between whether to invest your money directly through buying individual shares or indirectly through an investment fund. Before weighing the pros and cons let’s explore how both of these work:
Individual shares - buying individual shares of a company represents fractional ownership in proportion to the total number of company shares. Owning shares in a company i.e. being a shareholder gives you the chance to make gains through:
1. Dividends, which are sums of money paid over a certain period (usually once a year) from a company to its shareholders out of its profits.
2. Capital gains, which are the profits gained from the sale of an asset, for example, shares or real estate.