How to invest: start crowing your money today

Investing is one of the most effective ways to build your wealth over time. Whether you’re looking to secure your financial future or simply make your money work harder for you, understanding how to invest is a crucial first step.

In this guide, we’ll break down the basics of investing, explore different types of investments, and provide you with practical tips on how to start investing, even if you’re a complete beginner. 

What is investing? 

Investing might sound complicated, but at its core, it’s simply about putting your money into assets with the goal of making a profit.

Unlike saving, where your money sits in a bank account earning minimal interest, investing involves a bit more risk.

However, with that risk comes the potential for higher returns. Whether you’re investing in stocks, bonds, or property, the idea is to grow your money over time, making your future more secure. 

What are the common ways to invest? 

There are many different ways to invest your money, each with its own level of risk and potential return.

Here’s a look at some of the most common investment options available to you in the UK. 

Types of investments 

• Stocks: when you buy a stock, you’re purchasing a small piece of a company. If the company does well, the value of your stock may increase, allowing you to sell it for a profit. Stocks are known for their potential to offer high returns, but they can also be quite volatile. 
• Bonds: bonds are essentially loans that you give to a company or government. In return, you receive regular interest payments and, when the bond matures, your original investment back. Bonds are generally considered safer than stocks, but they typically offer lower returns. 
• Real estate: investing in property can be a solid way to grow your wealth. This can be done by buying a property to rent out or through real estate investment trusts (reits), which allow you to invest in property without actually owning one. Property can provide steady income, but it requires a significant upfront investment. 
• Mutual funds and etfs: these are pooled investment vehicles that allow you to invest in a diversified portfolio of stocks, bonds, or other assets. Mutual funds are managed by professionals, while etfs (exchange-traded funds) can be bought and sold on the stock market like a regular stock. They offer diversification and are a good option for beginners. 
• Savings accounts and isas: if you’re looking for a low-risk option, you might consider a cash ISA (individual savings account) or a regular savings account. While these don’t offer high returns, they provide a safe place to keep your money, often with tax-free interest. 

How much do you need to start investing? 

One common misconception is that you need a lot of money to start investing. In reality, you can begin with relatively small amounts.

For instance, many online investment platforms like Nutmeg or Hargreaves Lansdown allow you to start with as little as £100. The key is to start small and build your investment over time. 

To make the most of your money, consider setting up a regular investment plan, where you invest a fixed amount every month.

This strategy, known as pound-cost averaging, can help smooth out the ups and downs of the market and reduce the impact of market volatility on your investment. 

How to invest money 

Getting started with investing can feel overwhelming, but it doesn’t have to be. Follow these steps to begin your investment journey with confidence. 

How do I start investing as a beginner? 

1. Set financial goals: before you start investing, it’s important to know why you’re doing it. Are you saving for retirement, a home, or your children’s education? Your goals will help determine your investment strategy. 
2. Educate yourself: take the time to learn about the different types of investments and how they work. This will help you make informed decisions and avoid common pitfalls. 
3. Choose an investment platform: there are many platforms available in the UK that make it easy to start investing. For example, Vanguard UK offers a range of low-cost funds, while Fidelity provides access to a wide selection of investments. 
4. Start small: it’s often wise to begin with low-risk investments, such as a diversified mutual fund or ETF, and gradually diversify your portfolio as you become more comfortable investing. 

How to invest in stocks 

Investing in stocks is one of the most popular ways to grow your wealth, but it requires a bit more knowledge and research. 

1. Research: start by researching companies or sectors that interest you. Look at their financial health, growth potential, and market position. 
2. Choose a brokerage account: to buy stocks, you’ll need to open a brokerage account with a platform like AJ bell or Interactive Investor. These platforms allow you to buy and sell stocks, as well as track your investments. 
3. Place an order: once you’ve done your research and selected a stock, you can place an order through your brokerage account. Decide how much you want to invest and whether you want to buy at the current market price or set a specific price. 
4. Monitor your investment: after buying stocks, it’s important to monitor their performance regularly. Stay informed about the companies you’ve invested in and be prepared to make adjustments to your portfolio if needed. 

Are there any fees or costs? 

Yes, investing does come with some fees, and it’s important to be aware of them as they can affect your overall returns. 

• Brokerage fees: these are the fees you pay when you buy or sell investments through a brokerage platform. Some platforms charge a flat fee per trade, while others may charge a percentage of the transaction value. 
• Management fees: if you invest in mutual funds or etfs, you’ll likely pay a management fee. This fee is a percentage of your investment that goes towards paying the fund managers who oversee the portfolio. 
• Account fees: some investment platforms charge an annual fee for maintaining your account. These fees can vary, so it’s a good idea to compare costs across different platforms. 

To minimize these costs, consider using low-cost index funds or etfs, and look for platforms with low or no account fees. 

When should you start investing? 

The best time to start investing is as soon as you can. The earlier you start, the more time your money has to grow, thanks to the power of compound interest.

Compound interest allows you to earn interest on your initial investment, as well as on the interest that accumulates over time, leading to exponential growth. 

For example, if you start investing £100 a month at age 25 and continue until you’re 65, assuming an average annual return of 5%, you could end up with nearly £150,000.

Starting even a few years earlier or later can make a big difference in your final balance, so the sooner you start, the better. 

Common mistakes to avoid when investing 

Investing can be a powerful tool for building wealth, but it’s important to avoid common mistakes that can undermine your efforts. 

• Not diversifying: one of the biggest mistakes investors make is putting all their money into one type of investment. Diversifying your portfolio by investing in different asset classes (e.G., Stocks, bonds, real estate) can help reduce risk. 
• Timing the market: trying to predict market movements and timing your investments to buy low and sell high is a risky strategy that often doesn’t pay off. Instead, focus on a long-term investment strategy and avoid reacting to short-term market fluctuations. 
• Ignoring fees: high fees can eat into your returns over time. Be sure to understand the fees associated with your investments and look for low-cost options whenever possible. 
• Emotional investing: making investment decisions based on emotions, such as fear or greed, can lead to poor outcomes. Stick to your investment plan and avoid making impulsive decisions based on market movements. 
• Resources for learning more about investing 

If you want to deepen your understanding of investing, there are plenty of resources available to help you. 

• Books: consider reading “the intelligent investor” by benjamin graham, a classic book that offers timeless advice on investing. 
• Online courses: platforms like Coursera and openlearn offer free courses on personal finance and investing that can help you build your knowledge. 
• Investment blogs: follow uk-based blogs like Monevator for ongoing insights and tips on investing. 
• Financial advisors: if you’re unsure where to start or need personalized advice, consider speaking with a financial advisor who can help you create a tailored investment plan. 

Conclusion 

Investing is a powerful way to grow your money and secure your financial future.

By understanding the basics, exploring different types of investments, and starting with small, manageable steps, you can begin your investment journey with confidence.

Remember, the key to successful investing is to start early, stay informed, and avoid common mistakes.

Whether you’re just starting out or looking to expand your existing portfolio, there’s no better time to start investing than today. 

Did you enjoy this content? Then you might also be interested in reading: Your essential guide to retirement in the UK