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Beginner’s Guide

Get on the right path to investing

You don't have to be rich or a rocket scientist to become an investor. If you’re thinking about investing, there are really two main things you need to understand:

  1. You’ll need to hang on to your investments for at least five years or longer
  2. Even if you do, there’s a chance you might get back less than you put in.

To find out more about the basics of investing explore our 6 step guide.

Smart Investor doesn't offer personal advice, so if you're unsure about investing, please speak to a financial adviser.

  • Step 1: Save or invest? Save or invest?

    Deciding which option is right for you

    The choice between holding cash in a savings account and investing could have a big impact on your future. When you invest, you hope for greater returns than you can get from a savings account but you also have to accept that you could get back less than you put in.

    Start by taking a close look at your finances and your commitments to work out where you are now, and where you want to get to.

    Are you ready to invest?

    Before you start investing it’s important to consider if:

    You’ve paid off any debts like credit cards or loans
    You have sufficient savings you can access in emergencies

    Now you can start to think about how much you can afford to put away – and whether you’re comfortable with the risks.

    Give your money time to grow

    The sooner you’re able to start investing, the longer your money has a chance to grow.

    You don’t need a big lump sum to get started, putting money away regularly can make a big difference in the long-term.

    If you’re not sure whether to save or invest, learn more about the differences between the two.

    Move on to step two below

    Or if you're ready

  • Step 2: Set your goals Set your goals

    A little bit of planning

    Knowing what you're investing for, and when you're likely to need the money is really important.

    Perhaps you're investing to cover the education costs for your children; plan ahead for home improvements in the future, or so that you can enjoy a comfortable retirement.

    Short-term

    For short-term goals, say less than five years, opting for a savings account or a cash Individual Savings Account (ISA), offers the security that you’ll get the same amount back.

    Long-term

    For long-term goals, you should consider how much you’d like to build your savings in the period, balanced with the level of risk you’re comfortable with.

    Move on to step three below

    Or if you're ready

  • Step 3: Risk and reward Risk and reward

    Balancing risk and reward

    All investments involve the risk of loss – which sounds scary but the whole point of investing is the belief that by taking some risk you have the potential to achieve a better return than simply leaving your money in a savings account.

    Often the greater the potential rewards, the bigger the risk of loss involved. The key is to work out where you feel comfortable between risk and reward. If you’re investing for around five years, you might decide you want to be more cautious. But if you want to leave your money invested for much longer, you might prefer to take more risk.

    Length of time

    You should invest for at least five years, but ideally longer. The more time you’re invested the better chance you have to make money when you sell your investments.

    Diversification

    If you invest in a good mix of companies and asset types you’re spreading the risk. If you choose a range of funds, the risk will be spread for you and managed by an expert.

    Move on to step four below

    Or if you're ready

  • Step 4: Choose an account Choose an account

    Which account is right for you?

    Before you can start choosing investments you need to decide what type of account would suit you best. We offer two accounts suitable for beginners.

    Investment ISA

    Also known as a stocks and shares ISA, it’s essentially a tax-efficient account where you can buy, hold and sell a wide range of investments. You can invest up to £20,000 this tax year – although you don’t have to use the full amount. You’ll protect your returns from Capital Gains Tax (CGT), tax on dividends and income tax.

    Investment Account

    If you’ve used up your ISA allowance and have more to invest, or you simply don’t want any limits placed on how much you can invest each tax year, then an Investment Account is an option for you.

    Of course tax rules, allowances and other reliefs from tax may change and the benefits depend on your own circumstances, which could change over time.

    Pricing

    We use simple pricing to help you understand what your investments will cost. We charge a service fee for your account and a transaction fee when you buy or sell an investment. Find out more about pricing.

    Retirement

    If your goal is saving for retirement you should be thinking about the best pension for you. You might already have a workplace pension or you may be looking for another option. Pensions are complex so you might need to take advice. Find out more about pensions.

    Move on to step five below

    Or if you're ready

  • Step 5: Start investing Start investing

    Your investment options

    Your aim should be to invest your money across a broad range of asset types and Smart Investor offer thousands of options. You can choose from over 2,500 funds, Exchange Traded Funds, investment trusts, as well as shares, bonds and gilts. Find out more about our investment options.

    However, if you’re new to investing this can make deciding where to invest tricky. So we have a few options to help make it a bit easier.

    A Ready-made solution

    If you want a quick and simple way to build a diversified portfolio you can choose from five funds managed by our investment experts.

    These are our Ready-made Investments. Each fund has a risk rating and a chart showing investment categories to help guide you.

    Once you’ve chosen the right fund for you, leave it to our experts to monitor and manage.

    Barclays Funds List

    If you’d like to choose your own investments from a wider range of funds, the Barclays Funds List helps you narrow down the many options available.

    Our experts have selected a range of funds they believe have the potential to perform well over the long-term. They actively manage the list, monitoring the selection and adjusting as required.

    Remember the value of investments can go down as well as up and you could get back less than you put in.

    Move on to step six below

    Or if you're ready

  • Step 6: Stay on track Stay on track

    Keep your investments on track

    Once you’ve chosen your investments it can be tempting to keep checking on their progress. Seeing markets fall can be scary, but try not to make any panic decisions. Remember you’re invested for the long-term so don’t be put off by every market movement.

    When stock markets are turbulent you should focus on the reasons you chose your investments and whether or not those reasons still hold true.

    Roughly every six months we suggest you check:

    Your overall financial situation and make sure you’re happy with the amount you’re investing

    Your goals and timeframes are still the same

    The level of risk you want to take is the same

    Your investments still meet the level of risk you’re comfortable taking – if you have a Ready-made Investment, our experts will make sure the fund is still aligned to the original risk profile.

    Build your knowledge and confidence

    We can help you learn more about the key principles of investing and keep you informed to help you build your knowledge to become a more confident investor. Just sign up to receive our free email updates which are packed full of the latest news and market insights.