Investing in the stock market used to be considered the preserve of red trouserwearing dads in the Home Counties, suits in the City — or something you paid a financial adviser to do for you.
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you → invest → you
Now we are all being urged to give it a go by everyone from finfluencers on TikTok to Martin Lewis to the Government, which this year rolled out its “savvy squirrel” awareness-raising initiative to encourage more of us to think about how to build long-term wealth.
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which → urge → wealth
The argument goes that keeping your life savings in cash may feel less risky than dabbling in the stock market but if you have money sitting in an account that does not pay interest that beats inflation you are guaranteed to lose money over time.
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you → go → time
Moving beyond the cash Isa can feel daunting, though, when there’s a lot of jargon to navigate.
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Moving → move → jargon
Don’t overthink it
One of the biggest barriers to getting started is a sense that you need to know everything before you do, believes Emilie Bellet, founder of Vestpod, a community that helps people improve their financial lives, including learning to invest, through courses, events and a podcast The Wallet.
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people → overthink → courses
That and the myth that you need a lot of money.
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you → need → money
You can open an investment account with as little as £1, though if you want to do things sensibly — financial advisers point out that investment should be a long game, for money you don’t need for at least three to five years in order to ride the ups and downs of the market — then you do need to be rich enough to have some cash savings as a buffer for emergencies, first.
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you → open → emergencies
Once you have decided to invest you need to choose an investment platform, an investment account, and then what to put in it.
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you → decide → it
You can open an account through an investment company, also known as a platform, fund supermarket, robo adviser or brokerage.
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You → open → platform
The main differences between those on offer, including from companies such as Hargreaves Lansdown, Vanguard and AJ Bell, online platforms like eToro and Wealthify, or banks such as Monzo, is the type of investments you can buy and the fees involved.
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you → include → investments
Some brokerages specialise in individual shares, which can be more risky for beginners, while others offer a limited number of funds, and fees can be charged as a percentage of your investments or a flat fee.
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fees → specialise → investments
Beginners might also want to look for a platform that specialises in making things easy, with readymade portfolios or educational advice built in, such as Plum, Moneybox, AJ Bell’s Dodl, or Bestinvest — which offers free financial coaches.
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which → want → coaches
What kind of account to go for
Most platforms offer a basic general investment account.
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platforms → go → account
You can get joint versions of this to invest with a partner, or a stocks and shares Isa, popular because any returns you earn on money in an Isa are free of tax.
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you → get → tax
You can invest up to £20,000 in a standard stocks and shares Isa each year, and £9,000 into a Junior stocks and shares Isa for children.
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You → invest → children
What should you invest in?
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you → invest → What
When you buy stocks or shares (also known as equities), you are buying a tiny slice of a company.
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you → buy → company
Selecting single stocks is considered more risky for a beginner because you are tying all your money to the fortunes of one firm.
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you → select → firm
If it has a bad few years, you will lose out.
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you → have → years
This is why experts talk about the importance of spreading your money across lots of companies, industries, countries, sectors and asset classes such as bonds, too.
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experts → talk → bonds
The easiest way to do this for a beginner is to invest in funds, where your money is pooled with that of other investors and then spread among a number of different assets or shares in companies.
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money → do → companies
“If you were to start with a multi-asset fund, you would have diversification from day one,” says Sarah Coles, head of personal finance at AJ Bell.
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Coles → start → Bell
“A ready-made portfolio is an excellent way to grow your money while keeping things simple,” believes Ben Faulkner of EQ Investors.
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Faulkner → make → Investors
“All the hard work of researching and stock-picking to curate a diversified portfolio is done for you by a professional, without having to spend hours scouring the internet doing your own research.
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work → research → research
For cost-conscious investors, low-cost index funds offer broad market exposure.”
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funds → offer → exposure
How to invest like a city fund manager
What do the experts do with their own money and what mistakes do they see?
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they → invest → mistakes
We ask three City fund managers for their tips.
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We → ask → tips
“One of the things that puts people off getting started in investing is thinking they need to find the perfect investment initially.
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they → put → investment
Time heals a lot of mistakes.
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Time → heal → mistakes
The best thing to do is get going early.
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thing → do → ?
So, for beginners, I’d focus less on finding the next winning stock and more on building good habits.
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I → focus → habits
Consistency, patience and not looking too often really helped me when I first started investing my own money.”
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I → look → money
Sabrina Denis, investment specialist for Middle East, Africa and Central Asia, Janus Henderson Investors
“Diversify properly — that doesn’t mean five technology funds that all own the same ten stocks.
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that → diversify → stocks
Genuine diversification means holding things that behave differently from one another.
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that → mean → one
The bulk of my money sits in diversified, unexciting holdings, which is precisely what lets me sleep when markets turn rough.
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markets → sit → holdings
Alongside that, I do hold exposure to the areas I find exciting: technology, healthcare and innovation-led themes.
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I → hold → areas
The best portfolio managers are patient and deliberate, only making changes when they have a strong reason to do so.”
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they → make → reason
Daniel Bland, head of sustainable investment management, EQ Investors
“Most people only start worrying about markets once there’s been a run of bad news.
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people → start → news
But by the time you read about it prices have already dropped, because markets react immediately to known facts.
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markets → read → facts
For private investors, timing decisions are usually driven by fear that markets are about to fall.
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markets → drive → fear
…and 12 more, not listed.
The Aporia
