How to get started in investing

The world of investing can seem off-putting for beginners, but after learning a few basics it has never been easier to get started.

This content is more than 6 months old now, please visit the news area of this site for more recent content

  1. Rob Morgan

Most people appreciate the need to grow their money over time. It’s not just a desire to become comfortably off but a necessity – to preserve the spending power of hard earned savings against rises in the cost of living. Cash in the bank simply doesn’t give a decent enough return.

Yet the world of investing can seem off-putting and riddled with jargon. A simple requirement to build a nest egg can become a maze for the uninitiated.   More cautious people can also be wary that the stock market – investing in company shares – involves casino-like levels of risk and conclude it isn’t for them.

 

A bumpy ride, but one worth considering

It is true there can be a bumpy ride when investing in shares. You are buying a small slice of a company and get a share of growth and profits. But profits don't always go up and companies can shrink as well as grow. In addition, the stock market rises and falls depending on people's confidence in the economy and in businesses.

The chart below shows the peaks and troughs of a fund designed to track the performance of the UK stock market over the past ten years. The bottom line is that investments can go down in value and there's always a chance you'll get back less than you put in.

Chart: Performance of a typical fund investing in the UK stock market over ten years

Source: FE Analytics, total return basis with net income reinvested. Past performance is not a reliable indicator of future results.

 

One way to help counter the inevitable ups and downs is to invest smaller amounts regularly rather than a lump sum in one go. If you started investing £100 a month in the UK stock market ten years ago using a typical tracker fund, you'd now have £18,331. By comparison, with a reasonable bank account (assuming an interest rate of 1.5%) your £12,000 of contributions would now be worth just over £13,000. Over this sort of timescale you have a good chance of a positive return through regular investing in the stock market, though this is not guaranteed. Source for data: FE Analytics to 1 May 2019, using L&G UK Index Trust, total return basis with net income reinvested; Please note however that past performance is not a reliable indicator of future results.

Investing regularly also means you don’t need thousands, or even hundreds of pounds to become an investor - you can get started from as little as £50 a month. It all adds up in the long run, and starting small can help you get comfortable with how it all works.

 

Invest online quickly and easily

Fortunately it has never been easier to start investing. With an online investment platform like Charles Stanley Direct – an account where you can hold your own shares, funds and other investments – you can get up and running in minutes. It’s possible to open an account all from the comfort of your laptop or smartphone, and you can easily keep tabs on how things are going online or through an app.

This type of ‘direct’ investing often has the advantage of being cheaper, so if you have straightforward needs that don’t require advice you could save money on fees and charges too.

 

Top investing tips:

  • Any expensive debts such as personal loans, overdrafts and credit cards should be repaid before starting to invest – though pensions where your employer contributes are a possible exception.  Mortgage debt should also be kept under control with an appropriate repayment plan in place.
  • Don’t put all your eggs in one basket. Individual shares can be risky. Instead you can buy funds, which buy lots of different shares so you aren’t reliant on a small number of companies succeeding.
  • If you aren’t confident in making investment decisions there’s basic help for those starting out. For instance our Foundation Portfolios are ‘ready-made’ starter combinations of funds for certain goals.  Alternatively, for those who want to be less hands-on, there are investments that invest in a variety of assets with a manager overseeing what to buy and sell. For instance, funds in Charles Stanley’s Multi Asset Fund range provide diversified portfolios in one easy-to-buy investment, monitored by experts.
  • Tax-efficient accounts should be a priority; specifically Individual Savings Accounts (ISAs) and Pensions. These could save income and capital gains tax and boost long term returns.

 

Past performance is not a reliable guide to future returns. This website is not personal advice based on your circumstances. No news or research item is a personal recommendation to deal. Investment decisions in fund and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and Prospectus. If you are unsure of the suitability of your investment please seek professional advice.

More from author

  1. Rob Morgan

    What are strategic bond funds?

    Fund Research - 29th May 2019 14:34pm

    Strategic Bond Funds could offer a solution in a difficult environment for investors ...

  2. Rob Morgan

    Eight retirement planning mistakes

    Fund Research - 29th May 2019 14:34pm

    There have never been more options in terms of retirement planning, but arguably ther...

  3. Rob Morgan

    Woodford Income Focus - update

    Fund Research - 29th May 2019 14:34pm

    Level of redemptions may compromise the fund manager’s strategy in terms of portfolio...

Most read articles

  1. How to get started in investing

    What are strategic bond funds?

    Fund Research - 29th May 2019 14:34pm

    Strategic Bond Funds could offer a solution in a difficult environment for investors ...

  2. How to get started in investing

    Woodford Income Focus - update

    Fund Research - 29th May 2019 14:34pm

    Level of redemptions may compromise the fund manager’s strategy in terms of portfolio...

  3. How to get started in investing

    A simple but effective way to invest

    Fund Research - 29th May 2019 14:34pm

    Investing regularly can help counter stock market volatility and build a substantial ...

Investment involves risk. You may get back less than invested.