Start investing

So you’ve got a bit of money each month that you can save up, you’ve heard of investing, and you’re wondering how to start.  This little guide is for people new to investing.

It’s easy once you know how :

You probably want a “Stocks and Shares ISA” (though on the platform websites below you can see some alternatives).  You want one from a platform  company that is going to charge you very little.  There are a few money websites that regularly update their tables showing which platform company charges what.  As you are just getting into investing you want to look at which platform companies work out cheaper for a small total value.  Not sure how often these websites update their data but they seem to show a good range of companies:

https://www.moneyobserver.com/our-analysis/which-isa-platform-should-you-pick-we-compare-different-brokers

https://moneytothemasses.com/saving-for-your-future/investing/the-best-stocks-and-shares-investment-isa-the-cheapest-fund-platform

https://www.thisismoney.co.uk/money/diyinvesting/article-1718291/Pick-best-cheapest-investment-Isa-platform.html

I list a few platform companies on my “Links” page.  If you want to simply follow the crowds, go with Hargreaves Lansdown https://www.hl.co.uk/ or AJ Bell YouInvest https://www.youinvest.co.uk/  They are both pretty well-run websites but HL’s charges get steep if your investment is larger, and become hard to justify despite their very good customer service and explanation of rules.

The platform company websites explain the latest rules that the government has in place about ISAs.  In a nutshell, you can put in a limited amount each year, and you can withdraw as much as you like, and withdrawing doesn’t increase your input limit.

You pick a platform company, sign up, and decide how much you are paying in each month (and/or how much as a lump sum to start).  Remember that switching later to a different company is very easy – you ask your new choice to manage the movement of your investments.  So far so good.

Then they say “which of our thousands of investments do you want to put your money into?”  Sometimes they include some mention of “risk”.  At this point some people are bewildered and cancel everything.  No! This isn’t so difficult.

You have three choices.

1. You phone them or email them, they help, and you pay extra for the privilege.   Easy but not cheap.

2. You pick one of their ready-made portfolios – they often have a handful of them with names like “low risk” or “adventurous”.  It’s not a terrible choice BUT if you go for this please don’t let your uncertainty about investing make you choose the option they call “low risk”.  If you want growth and you don’t need to save a particular sum by a particular date, then you probably want medium or high “risk”.

3. You pick one or two funds.  This is a good choice if you hope to get into investing, because in the future picking funds will be a great way to tailor your investment.   To start I suggest a low cost fund that might be called a “index” or “tracker” or “ETF”.  And you are going to pick a part of the world ( UK, S.E.Asia, Europe, Japan, North America, Emerging Markets) or just a general “Global”.   A couple of days ago some friends asked my opinion, and just at the moment I’m consider one or two from:

Ishares Pacific ex Japan equity index class H – accumulation (GBP)

Legal & General UK index class C – accumulation (GBP)

Legal & General US index class C – accumulation (GBP)

HSBC European index class C – accumulation (GBP)

Legal & General International index trust class C – accumulation (GBP)

All done!  Now as your money is paid in, it goes into whatever option you chose, and hopefully it grows.

Just one last point – investments are volatile and rise or fall every day.  Don’t switch to other funds just because today was negative – look at the long term.  I review my choices once a year and leave over half of them unchanged.