A beginner's investment guide
Are you interested in investing in the stock market but unsure of where to start? Our guide on how to invest in stocks and shares in the UK breaks it down for you
Key takeaways
Investing in the stock market can be a rewarding way to grow your wealth, but it’s essential to consider the risks and make informed decisions
Stocks are not a quick flip; they require a long-term perspective
Align with your investment goals, comfort, and income level
Diversify your investment and savings portfolio to spread risk
The allure of the stock market is undeniable. With the potential for substantial returns, it's an attractive option for those looking to grow their wealth.
Investing in the stock market can give you a higher return than keeping your money in a savings account. However, as with any financial venture, it comes with a set of risks and considerations that should not be overlooked.
What should I consider before investing?
Before you dive into the world of stocks and shares, there are several questions you should ask yourself:
Am I prepared to lock my money away for a while?
Investments in stocks are generally not a quick flip. They should be considered for the long term, as the market can fluctuate, and it often takes time for investments to yield substantial returns.
Can I cope financially if my investment falls?
It's crucial to be aware of the potential for financial loss. The value of your investments can go down as well as up, and you may not get back the amount you invested.
How much risk am I prepared to take?
Different stocks and shares carry varying levels of risk. Evaluating your comfort with potential losses and gains is essential in choosing the right investment for you.
What are the costs involved?
There are fees associated with buying, selling, and managing investments. These can vary and should be factored into your financial planning.
How hands-on do I want to be with my investment?
Investors have a range of options, from personally managing their portfolio to employing the services of brokers or robo-investors.
Are there specific sectors or companies I want to invest in?
Your personal preferences, values, or insights might lead you to invest in specific industries or companies. This should align with your overall investment strategy and risk tolerance.
How to start investing in stocks
The process of buying and selling stocks for companies listed on the stock exchange is quite straightforward once you get to grips with the basics:
Choose how you want to invest
You have a range of options here, including hiring a stockbroker, consulting a financial adviser, managing shares via an online investment platform, or opting for robo investing.
Open a tax-free investment account
Consider opening your account as a stocks and shares ISA through MoneySuperMarket. This will allow you to benefit from tax-free growth on up to £20,000 invested each year.
Research your investment options
You can invest in individual stocks or exchange-traded funds (ETFs), with myriad choices across different sectors, regions, and ethical considerations.
Decide your risk level
Your risk tolerance should be based on factors like your investment timeframe, financial comfort, income level, investment goals, and what proportion of your assets you're investing.
Decide how much you want to invest
Invest only what you can afford to lose. Consider diversifying your investments to spread risk.
Deposit money into your investment account
Follow your chosen platform's instructions to deposit funds, which will remain as cash until you choose to invest.
Purchase your desired stock or funds
When you're ready, use the investment platform to buy your chosen stocks or funds. Keep an eye on the charging structure when making these purchases.
Manage your portfolio
Regularly review your investments, making buys or sells as you see fit. Use the tools provided by your platform to make informed decisions.
What are the advantages and disadvantages of stock market investment?
Here are some positives and drawbacks to consider before you start investing in stocks:
Advantages
Potential for high returns: There is no cap on the returns you can achieve
Tax-free growth within an ISA: Utilise the tax advantages of an ISA to maximise your returns
Diverse investment choices: A wide array of options means you can find investments that suit your strategy
Ease of use with investment platforms: Platforms offer varying levels of involvement, catering to both hands-on and hands-off investors
Disadvantages
Risk of loss: The value of investments can fall
Costs: Fees can eat into your returns
Time: Researching stocks and staying informed can be time-consuming and outcomes are never guaranteed
Should I invest monthly?
Investing each month can help smooth out the cost of share purchasing and allows for a consistent investment strategy without overstretching financially. Investing each month doesn’t rule out the value of your shares dropping though.
If you are concerned about losing money, then savings accounts offer a safer alternative, although they don't have the potential to make such large returns.
Discover your ideal stocks and shares ISA
MoneySuperMarket offers a selection of investment ISAs, providing details on minimum investments, fees, account management, and ISA transfers. Opening an account with your chosen provider is quick and straightforward.
Author
Victoria Russell
General Manager - Commercial
Vikki has worked across financial services for over 20years, and for the last 15 years, created and nurtured a career within MoneySuperMarket Group, leading to her current role as General Manager for...
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Collette Shackleton
Content Writer
Collette Shackleton is a highly skilled Content Writer who has over nine years’ experience creating helpful and engaging personal finance content for consumers. Collette shares her experience as a...
