Three ways to multiply your savings

Investing is one of the key steps towards achieving financial stability and securing your future. In today’s article, we will cover three popular methods of investing through which you could increase your savings and achieve your financial goals. For those who are considering buying property to invest, our article will provide valuable tips.

Of course, any investment involves risk and your investment can fall as well as rise so you may get back less than you invest. Don’t forget to seek the help of an accredited independent financial advise from a regulated financial adviser before making any decisions. We would also like to add that Extend Finance Ltd. does not provide investment advice and takes no responsibility for investment decisions made after reading this article. The post is also not any form of investment advice and is for informational purposes only.

Buying and renting property

Let’s just start with investing in property. Buying a house in the UK for rent has a history of at least a couple of hundred years and is still a popular way for many to secure their financial future. This process may result in a regular and stable income, and additional profits due to the possibility of an increase in the price of the purchased property. Currently, property prices in the UK are admittedly falling, but historically the upward trend has prevailed.

Here are some key benefits and steps to consider:

• Passive Income*:* Renting out a property generates a steady passive income that can help cover the cost of purchase and accelerate Buy to Let mortgage repayments;

• Portfolio Diversification: Property is a valuable addition to a diversified investment portfolio, helping to minimise the risk of losing savings accumulated over the years;

• Capital Value: Over the longer term, property may appreciate in value, which can bring profits on eventual resale.

As we mentioned, house prices in the UK are currently falling, but rental prices, due to higher interest rates, are rising sharply (here is an article on the subject: Rents set to rise almost five times faster than house prices by 2026: Hamptons). This means that higher mortgage servicing costs are being passed on from investors to tenants. If you are interested in this option, the Extend Finance team would be happy to help you find a suitable mortgage. We encourage you to get in touch!

Investing in dividend stocks

Investing in dividend stocks may be another effective way to build wealth. It involves buying shares in companies that regularly pay dividends to their shareholders. Here’s why you should consider this strategy:

• Steady Income: Dividend shares usually provide regular payments in the form of dividends, providing a source of stable income;

• Capital Growth: The value of the shares can also increase, benefiting you when you eventually sell;

• Diversification: thanks to the variety of companies available, investing in dividend stocks allows you to diversify your savings;

• If you live in the UK and buy shares, you can take advantage of what is known as a Stocks and shares ISA. As long as you do not exceed the £20,000 investment limit within the tax year, no income and capital gains tax will be paid on the money you hold there. For more on this see: Stocks and shares ISAs.

What do such investments look like in practice? First and foremost, you have to register yourself on platform, where you can buy dividend stocks with ISA. The next step is to buy stocks. Depending on your preferences, you can choose to pick the shares yourself or use the guidance and recommendations of experts. You will find many ready-made investment portfolios on the internet.

Both options have their advantages - ready-made solutions are more affordable and potentially simpler to implement, while self-analysis can yield higher returns as you decide on the level of risk or the sector you want to fund. This can be done, for example, on the DividendIntel website. Once you have bought shares, the company is likely to pay you a dividend every few months - sometimes this happens up to three times a year. With the proceeds, you can buy more shares and in this way slowly build your wealth.

Holding money in an account with interest

In addition to property and dividend stocks, there are many other investment options. Given the relatively high interest rates, it is worth considering putting savings in an account with interest. This is a great option for those with a low risk tolerance. As bank deposits are protected up to £85,000 by the Financial Services Compensation Scheme (FSCS), for low amounts, the risk is relatively low.

At the time of writing, some banks in the UK are offering interest rates in excess of 5%, which may be attractive to many people.

Investing can be a key tool in building a financial future. For those considering investments such as buying property, investing in dividend stocks or alternative options, there are different paths to choose from.

It is important to have a good understanding of your goals and take certain steps. Otherwise, uninvested money, due to high inflation, will quickly lose value.