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The best investment guide for beginners

The best investment guide for beginners
Image source: Getty Images

Coming up with the best investment guide for beginners can be tricky. If you don’t know anything about investing, deciding where to start can feel overwhelming.

For example, many people believe that you need a lot of money to invest. However, experts believe that starting with even £50 a month can make a big difference in the long run.

We’ve put together the whys and hows of investing to help you navigate the financial world a little more easily.

How to start

If you’ve never invested before, you first need to decide what your goal is. Are you investing long-term for your retirement, or are you hoping to buy a house in 5-10 years? Or maybe you’re just trying to increase your net worth as a general financial goal. If you aren’t sure what your true goal is, it’s a good idea to talk to a financial adviser to help you figure things out. 

Before you start investing, you should also make sure you have an emergency fund in place. At a minimum, you should have three months’ salary saved up in an interest-earning savings account. This will help you cover unexpected expenses so you don’t have to touch your investments or go into debt to pay for emergencies.

Types of investment

The next and most important step to help you start investing is deciding what your portfolio will include. The best investment guide out there won’t replace time spent learning about the market on your own.

According to The Money Advice Service, diversifying helps you reduce your overall risk when investing. By spreading your money across different assets, you reduce the risk of loss during market changes.

The most common investment options include:

  • Stocks: These are shares in a company – anything from Starbucks to Tesla to Apple.
  • Exchange-traded funds: Exchange-traded funds (ETFs) hold a combination of stocks, bonds and other commodities. Rather than buying stocks from a single company, you’re buying tiny shares of many companies grouped together into one ETF. ETFs are safer long-term investments than single stocks because they’re not tied to a single company and how that company performs in the market.
  • Building society savings accounts: A great way to put money away in a savings account offering interest rates slightly higher than a regular bank. Some building societies also offer bonuses for deposits that can help further increase your gains.
  • Property: If you have a larger budget, investing in a commercial or residential property might be a good move.
  • Bonds: Bonds offer a lower return than stocks, but they’re arguably a safer long-term investment.
  • Collectibles: Here, we’re talking things such as art and antiques, old toys or even wine. This requires knowledge in specific niches in order to find good investments at good prices.
  • Commodities: Commodities include silver and gold.
  • Bitcoin and other cryptocurrencies: Perhaps one of the most volatile investments and risky assets out there.
  • Startup investment: Platforms such as Seedrs and CrowdCube allow you to support early-stage companies in exchange for equity. Startup investment is not without risk, however.

Design your strategy

As the final step in your investment guide setup, figure out how much you can invest on a regular basis. The basic rule is “never invest more than you can afford to lose.” If your finances are very tight and losing £1,000 in a market crash would seriously hurt you, then you shouldn’t invest that much.

Investing £25 or £50 regularly will add up to a large sum over time, so if that’s all you can afford right now, start with that.

Are you overpaying in broker fees?

Share dealing fees are not always straightforward. Use our free broker cost calculator to easily compare broker fees and see which providers listed offer the best value. 

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