Pipsmum wrote:
It is a bit more exciting than a savings account so maybe that will be it's attraction. Not sure yet.
It feels like only semi predictable horse racing to me. I think the ride might be worth it even if I lose. Then at least I can say I tried it instead of wondering if I should. Hopefully one won't lose on everything and all. We'll just see won't we?
Have a look at some of the income-strategies available. As a beginner such as yourself, a few years ago now, I feel that I was very lucky to stumble on The Motley Fool forums when I was looking to start investing seriously, having previously lost a significant sum of money doing it out on my own with no real investment-related knowledge behind me. I found the HYP (High Yield Portfolio) strategy very appealing indeed, with it's focus on dividend-income from a portfolio of equities, rather than looking at growth-based strategies that I felt, at that time, needed a little more focus and attention than I was wanting to give to what was going to be a long, regular-investment period ahead of me.
I can honestly say that it has been one of the best financial decisions I've ever made, and I'm as happy with the HYP strategy today as I was all those years ago when I first began looking at it.
Your analogy with a horse-race is interesting, and I can see why you might currently think that investing in equities is simply a more '
sophisticated' gamble, and nothing more, but even if you're going to think that for a while (and you might, although I expect that view to change if you are able to persist with investing in the market as your experience grows), then you could think of an income-related investment-strategy as a horse-race that hopefully never '
ends' (in terms of the equities you invest in hopefully continuing to operate as an ongoing enterprise), and one that, during the race, pays out regular '
winnings' (in the form of dividends) whilst the race continues to be run....
From a personal point of view, when I first took up the HYP strategy even with relatively small amounts of initial capital, one of the very best things I found was seeing the initial small trickle of regular dividends come back to me from the companies I'd invested in, and, as time went on and I was able to invest regular extra-capital into my portfolio and also re-invest those regular dividends, I saw both the dividends rising simply because in general (and almost certainly on an overall-portfolio basis) the companies I'd invested in do tend to raise their payouts-per-share over time, and also because the amount of capital I continued to have invested was also growing as well, giving me more dividends from extra companies, or more dividends from some of the same companies because I'd invested more in them since the previous years.
This regular stream of dividends gives a starting-out-investor great visibility in the power of income from equities, and the huge influence that compounding-returns has over your portfolio, as last years income is re-invested and goes on to produce even more income next year, over and above that which would be generated anyway, from the original base-capital.
Sticking with this strategy over many years has meant that I've been able to see my income-stream grow significantly from those initial small amounts, and has also given me great confidence that
generally and
over long periods, income from shares in the form of dividends is much less volatile that the capital value of the shares delivering that income. This is a key point to the HYP income-strategy, and is a real benefit to those of us who prefer to use it, rather than using other, perhaps more growth-based strategies that derive much of their '
income' from selling shares that they hope will rise in value over time, rather than purely delivering income.
I'd never try to suggest that an income-strategy like the HYP one used by many around here is '
better' or '
worse' than a more growth-based strategy, but I would definitely suggest that some people are
better suited to one rather than the other, and without a doubt I can say that the HYP income strategy suits me, and I'm very lucky to be able to say that.
One other thing I'd say before ending what's turned out to be a longer post than I initially intended, is to keep an eye on Investment Trusts as well. They can provide some 'instant diversification' in terms of minimising single-(or very small-number-of..)company-risk, especially during the initial build-phase of an equity portfolio. What you may lose in terms of a small margin for IT-management costs, you might gain in 'sleep-at-night-ness' and better diversification in the market, hopefully minimising the risk of big fluctuations in capital value compared to the risk of picking an initially-small number of shares to invest in that may go on to hit trouble early on in your investment 'career'.
They are a good, low-cost way to spread your capital around the market without having to buy small amounts of actual shares yourself, so think about taking advantage of that if you think it might be a benefit. Some of the income IT's I invest in still pay a significant amount of income in the form of dividends, and provide a healthy 'base-core' of my HYP portfolio in terms of market-spread.
Best of luck with your own investment-journey. Please do stick around and let us all know how it's going, whichever way you decide to go.
Cheers,
Itsallaguess