Welcome to the exciting world of investing! Whether you’re saving for retirement, a dream holiday, or a rainy day, understanding the basics of investing is a vital step towards financial empowerment. Let’s break down the essentials in a friendly and approachable way.

What is Investing?

Investing is the act of putting your money into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit. It’s about making your money work for you over time, potentially leading to greater financial security and freedom.¹

Why Invest?

Simply put, investing can help you grow your wealth. With the right investments, your money has the potential to earn more money. Think of it as planting a seed that could grow into a fruitful tree, provided you nurture it well.²

Understanding Risk

All investments carry some degree of risk. Generally, the higher the potential return, the higher the risk. It’s important to assess your risk tolerance and invest in products that align with your comfort level.¹

Starting with Shares

Shares, or equities, represent a portion of ownership in a company. When you buy shares, you’re hoping the company performs well, which could increase the value of your shares. However, share prices can fluctuate, so it’s important to research and consider long-term trends.¹

The Role of Bonds

Bonds are loans to the government or a company that pay you back with interest. They’re typically seen as less risky than shares but may offer lower returns. Bonds can provide a steady income and help diversify your portfolio.²

Exploring Funds

Funds, including mutual funds and exchange-traded funds (ETFs), allow you to pool your money with other investors to purchase a collection of stocks, bonds, or other assets. Funds are managed by professionals and can be a convenient way to diversify your investments.³

Setting Goals

Before diving in, it’s crucial to set clear, achievable investment goals. Are you looking for long-term growth, or do you need regular income? Your goals will guide your investment choices and strategy.²

Creating a Plan

With goals in hand, you can create an investment plan. Decide how much you can invest, how often, and in what types of assets. Remember to review and adjust your plan as your life and the markets change.¹

Stay Informed

The world of investing is ever-changing. Stay informed by reading financial news, using resources like MoneySavingExpert, and considering speaking with a financial adviser to keep your investments on track.¹

Conclusion

Investing isn’t just for the wealthy; it’s accessible to everyone. Start small, think big, and stay committed to your financial journey. With patience and a willingness to learn, you can navigate the investment landscape successfully.

Happy investing!

(1) Gavin Shepherd and Sam Dunn, ‘Investing for beginners’ (Money Saving Expert, Investing in stocks for beginners: How to get started, published 04 October 2018, updated 28 March 2024)

<https://www.moneysavingexpert.com/savings/investment-beginners> accessed 16 April 2024

(2) Investing for Beginners, (HSBC)

<https://www.hsbc.co.uk/investments/investing-for-beginners> accessed 16 April 2024

(3) Elizabeth Anderson ‘Investing Basics’ (The Times, Investing for Beginners: module one, Updated 19 October 2023)

<https://www.thetimes.co.uk/money-mentor/investing/investing-basics/investing-beginners-course-module-one> accessed 16 April 2024

(4) R.J. Weiss ‘How to start investing for beginners [step-by-step guide], updated 12 April 2024’

<https://www.thewaystowealth.com/investing/how-to-start-investing> accessed 16 April 2024