The world of investing can seem complex, especially for beginners. With different strategies and approaches shared in podcasts, online guides, and on social media too, knowing where to start can feel almost impossible.
Before you dive into the stock market, it’s worth taking time to understand the various routes available. Each method offers unique benefits and drawbacks, and choosing the right one depends on your financial goals, risk tolerance, and how long you’re willing to invest for. We’ve shared a few starting points below.
- Savings accounts
Savings accounts are one of the safest options, but they’re also known for bearing the lowest potential returns. But if you’re looking for an easy, low commitment start, saving is a valid choice.
When you set up a savings account with a bank or building society, your money is held in a secure account with a guaranteed interest rate.
Some accounts offer easy access to your funds, while others might lock your money for a set period in exchange for a slightly higher interest rate. This route is ideal for anyone building an emergency fund, saving towards a specific goal, or parking money for the future.
- Robo-advisors
These are automated investment platforms that use algorithms to create and manage investment portfolios based on your risk tolerance and financial goals.
Some of the best robo-advisors in the UK do charge a management fee, but they also allow convenient and low-maintenance investment. If you’re a new investor looking to take a hands-off approach, it’s a brilliant way to get professional guidance with minimal pressure.
- Fractional shares
Fractional shares are a relatively new option that allow you to invest in a fraction of a share.
Traditionally, if a company’s stock price is high, you’d need a large amount of money to buy even one share. Fractional shares break down that barrier, allowing you to invest smaller amounts in companies you might not otherwise be able to afford.
Many online trading platforms now offer fractional share investing. This approach is ideal for beginners who want to diversify their portfolio across a wider range of companies without a large upfront investment.
- Mutual funds and exchange-traded funds (EFTs)
These are investment vehicles that put money from many investors into a larger pool to buy a basket of assets. These might be stocks, bonds, or commodities.
Mutual funds are managed by finance professionals who make investment decisions on behalf of the fund. ETFs, on the other hand, passively track a particular index – a unit score that measures asset performance – and therefore offers a more hands-off approach.
Both mutual funds and ETFs provide diversification, too. This means that risk will be more spread out, offering an entry point for beginners who don’t want the pressure of choosing individual stocks.
- Individual stocks
This route allows you to invest directly in companies you believe have strong growth potential.
Owning stocks offers the chance for higher returns, but also carries a higher level of risk. The success of your portfolio relies on the performance of the specific companies you choose. This option therefore requires significant research and a good understanding of the stock market.
Stocks are typically not recommended for beginner investors unless they’re comfortable with a more proactive approach.
Remember, these are just suggestions to give you a starting point. It’s essential to get involved with your own research, act in line with your financial situation, and work out your risk tolerance before investing. Consider consulting a financial advisor for tailored guidance and advice.
