Investing can be a daunting prospect for many people, but it’s an essential skill to learn to secure your financial future. Whether you’re looking to build wealth for retirement, save for a big purchase, simply grow your money or do all those things, investing is a powerful tool that can help you achieve your financial goals.
One of the first steps in learning how to invest is to educate yourself on the basics of investing. Here are a few steps you can take to arm yourself with the knowledge to invest successfully.
Get a grip on the basics
If you’re reading this, it’s likely because you’re thinking about investing money but feel unsure as to what it involves or where to start. There are many different ways to invest, but the most common include stocks, bonds, investment funds, and exchange-traded funds (ETFs). We explore some of the key points you need to know about investing basics, including the different types of investments available.
There are various reasons to invest, including growing your wealth, protecting your money from inflation, achieving your financial goals, saving for retirement and building financial independence. In fact, it’s hard to do any of those without investing at least some money. It’s also worth being clear on the difference between saving and investing – and why it’s useful to do both.
Understand risk – and why it’s necessary
A crucial aspect of learning how to invest is to understand the risks involved, especially if it’s the risk that puts you off. The trade-off is a simple one: the more risk you take, the greater your chances of significant rewards; the less risk you take, the less you’re likely to get back. In other words, there’s no route to growing your money that doesn’t involve at least some degree of risk.
In fact, there can be a risk in taking too little risk, especially if you have time on your side and a long-term investment horizon. A key thing to remember, here, is that you can choose investments which suit your risk appetite. Diversifying your money across different sectors and countries – as well as different asset classes (such as shares and bonds) – can also help level out fluctuations in price.
Try it out
One of the best ways to learn about investing is to practice investing with a small amount of money. This can help you gain hands-on experience and learn how the markets work without risking a large sum of money. You can start by investing in a low-cost index fund or exchange-traded fund (ETF) to get a feel for how investing works.
You can dip a cautious toe into the water with as little as just £10 or £20 a month to begin with. Investment platforms have played a huge role in making investing easier for ordinary punters. Many platforms allow you to invest from £20 or £25 a month, and some require just £1 to get started. Here’s how to invest with £25 a month.
Take advantage of platforms
Investment platforms are a must-have for anyone who wants their money to work as hard for them as possible. The range of platforms is growing all the time, from those that will build your portfolio for you and offer access to advice, to no-frills services aimed at investors who know what they want to do and how to do it. These platforms allow you to invest in a wide range of assets, from stocks and bonds to cryptocurrencies and commodities, and can help you track your investments and monitor your portfolio performance.
Do your research
It is important to stay informed about the markets and economic trends. Reading financial news, following market updates and staying up to date on economic indicators can help you make informed investment decisions. Even the most basic investment platforms offer some educational material, while the bigger operators provide a regularly updated range of video clips, infographics, tools and calculators, news articles, research, investment statistics and guides.
For investors who want a helping hand, platforms that also have a choice of ready-made portfolios or investment selections (typically graded by risk level) are particularly worth a look. We have a list of the top platforms for investors who want a helping hand. Even more experienced investors can get a lot from playing around with the increasingly sophisticated tools offered by platforms, including a depth of data, analysis and research that until recently wasn’t available to the ordinary investor.
Dig a little deeper
There are a vast range of websites and tools out there that can help investors research and compare funds, including those provided by specialist research and fund ratings firms. The likes of Morningstar, Trustnet and Financial Express make enormous amounts of fund data and research available free of charge. Similarly, trade bodies including the Association of Investment Companies and Investment Association provide free access to data on investment trusts and open-ended investment companies respectively.
Surf the C+I site
Last but not least, CompareandInvest offers a rich array of learning guides, articles and videos. Use our free platform comparison tool to find the right one for you, and browse through the many articles on our website that can help you on your investing journey. These are a good place to start:
How to invest in stocks and shares
How to build an investing mindset
Photo by nurulanga on Canva
