How to Start Investing Safely and Profitably | Investments

Have the money aside

Inflation is 3.1% and it is impossible to find a paying savings account above that. But many experts say that one can reasonably expect investments to grow by around 4% per year after taking fees into account, or more if the stock market is booming.

If you invested £ 50 a month for 10 years and got a 3.9% return, you would end up with £ 7,348, according to investment firm Fidelity. That’s an increase of £ 1,348 on your contributions. Continue for 20 years and your profit is £ 6,193.

If you’re there for the very long term and you’re lucky, your returns may be supercharged with the power of compounding. Like a snowball rolling down a hill, your investment generates returns, and those gains are reinvested and begin to generate returns as well.

However, remember that investing means taking some risk – it’s possible that investments may lose value, so it’s not for everyone. First of all, you need some money set aside for emergencies, so allocate some of your savings there. It is also essential to tackle any costly debt, such as credit or store cards, before diving into the stock market.

Assess your risk

Before choosing where to invest your money, determine your risk profile. In other words: how comfortable are you in seeing the value of your investments go down?

Generally, the earlier you need your money, the less risk you have to take. Online investment providers designed for independent people, such as Nutmeg, Evestor, Wealthify, and sustainable investment provider Clim8, make this simple. Choose from a few investment options, rather than thousands of funds, after providers have asked basic questions about your preferences and goals to match you with the appropriate options.

Start small

Investing a small amount each month is a great way to start. You can, for example, start with £ 25 per month in a single fund, although some providers will accept contributions as low as £ 1.

Regular investment will help smooth out the ups and downs of the market. You buy more stocks when the stock market is doing badly and the price is lower, and less when their value goes up.

You can also invest a lump sum if you have some cash savings that you want to use on the stock market, for example, but this is a higher risk strategy because you could buy at the top of the market.

To take funds

Rather than buying stocks in individual companies, funds are a good option for beginners. They own a range of different companies, so you don’t have all of your eggs in one basket.

“When it comes to choosing funds, I think of personal investors in three big camps: ‘choose for me’, ‘help me choose’ and ‘I will choose myself,’ says Tom Stevenson, chief investment officer at Fidelity International.

There are plenty of investment websites that offer expertly curated best buy fund lists, including Wealth Shortlist from Hargreaves Lansdown and Super 60 from Interactive Investor.

There are two main types of funds: index trackers and active funds. Trackers, also known as passive funds, track a particular market index such as the FTSE 100. They usually return the average of the market in which they invest and, since no one chooses the investments, they are the cheapest option.

Active funds are generally more expensive because they have a manager who chooses the stocks they hold, with the aim of beating the market.

You can choose from thousands of funds, such as those focused on, for example, sustainable investments, small businesses or emerging markets.

Holding a range of funds spreads your money and protects you from market downturns. If one business loses value, hopefully another grows.

Be ready for use

If you don’t know where to start, you can opt for a single, ready-to-use fund that holds investments from all over the world.

Interactive Investor has a list of six quick start funds. “These are well-diversified multi-asset portfolios that are very competitively priced,” says Moira O’Neill, her personal finance manager. They include Vanguard’s LifeStrategy funds, each investing in thousands of global companies.

Alternatively, there are model portfolios on investment websites. These include a mix of some of the more popular funds and can be used as a template to build your own wallet. AJ Bell Youinvest offers four ready-made options, tailored to whether you are cautious, balanced, adventurous or looking for income.

Check the fees

Beware of fees, as they can really take a toll on your returns. Investment providers charge either a percentage fee, depending on how much you invest, or a fixed fee. offers a simple calculator to help you find the most suitable and cheapest supplier. “A percentage fee is preferable for portfolios up to £ 50,000, and Vanguard is the cheapest but offers a limited selection of investments,” says Bella Caridade-Ferreira, Managing Director of Comparetheplatform.

If you invest a larger lump sum, you’ll be better off with Interactive Investor, which charges £ 9.99 per month, including one free trade per month, she adds. As your investment grows, the fees stay the same with a fixed fee.

You will pay your investments on top of these fees, as well as to buy and sell funds. The average charge on active funds is around 0.75% which, in addition to the 0.25% service charge, brings the total to 1% per annum.

Use your Isa allowance

Wrapping your investments in stocks and Isa stocks means that you won’t pay income tax or need to include them on your tax return.

This tax year you can keep up to £ 20,000 in Isa packaging. You can invest all or part of your allocation in stocks and Isa stocks, and hold any investments you want.

Stay invested

Investing can be a bumpy journey, but it usually pays to keep your cool. You need at least five years, ideally much longer.

If you fail to cope with market downturns, your investments may bounce back and continue to be worth more.

“The great years can often follow the terrible ones,” says Richard Hunter, Head of Markets at Interactive Investor. “In 1974 the UK was in the throes of a recession, a miners strike, three-day weeks and an oil crisis – the FTSE All Share fell 55%. The following year, it increased by 140%.

If you want more help before you invest, seek help from a financial advisor, but you’ll have to pay. You can find a local one online at Unbiased or VouchedFor.

About Janet Young

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