Investing for beginners

Investing can be a rewarding journey that helps you secure your financial future and grow your wealth over time. But if you're new to it, the process can seem intimidating. This article is aimed at beginners in the UK who want to start investing but aren't quite sure where to start.

What is Investing?

Investing involves committing your money into various financial ventures with the expectation that your initial investment will grow over time. This can involve a wide range of investment types, such as stocks, bonds, mutual funds, or real estate.

Why Invest?

Investing is a powerful tool to help grow your wealth, beat inflation, and reach financial goals. Whether you're saving for a house, planning for retirement, or just looking to grow your savings, investing may help you achieve these goals more efficiently compared to saving money in a standard bank account.

How to Start Investing in the UK

Understand Your Financial Position

Before you start investing, you need to understand your financial situation. This can often be a little arduous and uncomfortable at times, however it’s crucial to know where you are at before you commit time and resources to investing.

Set Clear Goals

What are you investing for? This could be anything from a down payment on a house, your retirement, your children's education, or even a dream trip abroad. Your goals will help determine how much you need to invest and the type of investments you should consider.

Learn About Different Types of Investments

Different types of investments include:

Stocks: These are shares in a specific company. When you buy stocks, you're purchasing a piece of that company. Stocks have high growth potential but also come with higher risk. You can find out more about stocks and how they work here.

Bonds: When you buy a bond, you're essentially lending money to a company or government for a fixed period. In return, you'll receive interest payments. Bonds are generally lower risk than stocks. Unlike stocks, bonds don't give you ownership rights. They represent a loan from the buyer (you) to the issuer of the bond.

Funds: Funds, like mutual funds or exchange-traded funds (ETFs), allow you to invest in a diversified portfolio of assets. They are managed by professionals and offer a way to invest in a variety of assets without having to buy each one individually.

Choose Your Investment Platform

You'll need a platform to buy and sell investments. This could be a traditional broker, a bank, or an online platform or app. Choose one that suits your needs in terms of fees, accessibility, and the types of investments they offer.

Start Small

You don't need a large sum of money to start investing. You can start small and increase your investments as you grow more confident and understand more about the market.

Diversify

Diversification involves spreading your investments across different types of assets to reduce risk. If one investment performs poorly, others may perform well and balance out your losses.

Stay Patient and Keep Learning

Investing is a long-term game. There will be ups and downs, but historically, over the long term, investments tend to grow. Stay patient, keep learning, and adjust your strategy as needed.

Final thoughts

Investing is an important part of managing your finances and securing your future. It might seem daunting at first, but by understanding the basics, setting clear goals, starting small, and continually learning, you can navigate the investment landscape confidently. Always remember, investing involves risks, and it's important to do thorough research or seek advice from a financial advisor if needed.

The value of units can fall as well as rise, and you may not get back all of your original investment.

Approved by In Partnership FRN 192638 July 2023