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Investments

Investments generally refers to the process of putting your money into an asset or item to generate a future income. Common investments include stocks and shares, bonds and real estate

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How investments work

Investments provide you with an opportunity to make the most of your savings.

Investing your savings can make you extra money, but there is no guarantee. Some investments could lose you some or all of your money. Generally speaking, you stand to make more money from an investment, but you also have a higher risk of losing money.

You pick your investment depending on what balance of risk you are happy with; this is called the ‘risk/reward ratio’. The higher the risk, the higher the return on your investment.

Investments are often financial products offered by lending banks, online portals or arranged by financial advisors. Some examples of investment products include stocks, options, futures and retirement plans.

There are several ‘alternative investment’ options available. These vary widely from online Crowd Share schemes to assets such as property and fine art.

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Investments: where to start?

Investments are a long-term solution for growing your money. The Money Advice Service advises that investing is for those with a savings goal five years away. Investments generally only produce results if you give them plenty of time.

Dividend payments are normally a proportion of company profits divided amongst its shareholders. Be aware that some companies may not be profitable or if they are, they may choose to re-invest profit instead.

Stocks and shares appreciation is the growth in the value of the shares that you own over time. It is important to note that stocks and shares valuations can go up and down over time, and you may not always get back the money you put in.

Here are four investment tips:

Have clear investment goals

Are you saving goals long-term or short-term? Your savings goals can determine where you invest your money and the type of investment that best suits you.

Pick investments that support your goals

There are several investment options, and you need to pick one that suits your goals.

Many companies offer risk-rated investment funds. This means you know the risk/reward ratio, and you can make informed investment decisions.

Seek professional advice

Ultimately it is you who will decide where to invest your money. Speaking with a qualified financial advisor can provide expert guidance so you can make the most of your money.

Stick to the plan

Investments take time to return value. It can be tempting to cash out and invest in something else but resist the urge.

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How many investments should I have?

According to wealth giants Forbes, the right number of investments can range between one and forty. The truth is, there is no correct answer here, and it comes down to you.

Things to consider might be:

How much do you have to invest?

The less capital you have to invest, the fewer investments you should have. There’s no point spreading your money too thinly across investments. That’s because various charges apply to many investment transactions.

How experienced are you?

The investment sector is growing all the time and offers hundreds of thousands of opportunities.  

If you are new to investing, take it slow. Resist the temptation to expand your portfolio into “exciting” new sectors until you are fully informed of the risks.

How much time do you have to give to your investments?

Because investments work best over the long-term, leaving them alone is often the best option. But if you have many investments, you will still need to keep an eye on all of them. So do not overburden yourself. 

You can hire professional help – in the form of an IFA to give you general guidance or buy into an actively-managed fund and have a professional, qualified, pro stock-picker make decisions for you. But always remember that your investments are your money and nobody else’s. Investing is about taking responsibility. So do not take on too much.

Which investments are the safest and which are the riskiest?

No investment is entirely safe but some are riskier than others.

Investopedia says that equities and equity-based investments such as mutual funds present more of a risk due to price fluctuations in the market.

Are investments taxable?

Most forms of investment income are not eligible for income tax but are taxable in the form of ‘defence contributions’.

Since 2015, only Cyprus domiciles who are also residents are required to pay defence contributions. This means that most expatriates that are not Cyprus-born and haven’t been a resident for 17 of the last 20 years will be exempt from ‘defence tax’. This exemption will last for the first 17 years of residency.

For residents who are Cyprus domiciled, defence contributions are applied to income on investments worldwide as follows:

  • 17% on dividends
  • 30% on bank interest (3% if the total is under €12,000)
  • 3% on rental income (on 75% of gross income only)

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