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Beginner's guide to investing

Are you thinking about investing for the first time? Our guide takes you through some of the basics, then outlines how our tools can help along the way

  • What can I invest in?
  • Am I ready to invest?
  • What should I invest in?
  • How do I invest?
Important Note

Our website offers information about investing and saving, but not personal advice. If you're not sure which investments are right for you, please speak to a qualified financial adviser.

The value of investments, and the income from them, can go down as well as up, so you may get back less than you invest.

What can I invest in?

You can invest in almost anything but the most common investments are:

  • Shares
  • Bonds (e.g. UK government bonds known as 'Gilts')
  • Funds
  • Residential property (i.e. Buy-to-let)

There are also more niche options which may require more analysis and technical knowledge, such as:

  • Stock options
  • Cryptocurrency
  • Private companies

Am I ready to invest?

Before deciding to invest, you’ll need to review your finances. Everyone’s situation is different but here are some key things to think about.

Do you have any debt other than a mortgage?

If you have any outstanding personal debt such as a personal loan, credit card, or car loan, you should work towards paying these off before you think about investing. Paying off a loan is like a risk-free investment – if you have a credit card debt which is charged at 17%, you are getting a guaranteed risk-free 17% return when paying it off, which any right minded investor would jump at!


If you have a mortgage and are on a higher interest rate, you should focus on paying off the loan until you can either re-finance at a lower rate or it is paid off entirely.

Do you have an emergency fund?

You want to always have some cash on hand for emergencies. A good rule of thumb is to have enough to cover between 3 and 6-months expenses assuming you have no income.

In terms of how much you can invest, it again comes down to your personal finances. You can invest with a lump sum, or by setting up a regular monthly plan. In general we prefer the latter, as it can help budgeting knowing that a portion of your monthly income is automatically being invested.


Remember that when investing you should think of it as locking away the money for the longer term, in general at least a five-year period.

What should I invest in?

Everyone’s financial circumstances are unique and so there is no one-size fits all approach to investing.

We have developed tools which aim to demonstrate some key financial concepts and strategies to be aware of when investing.

The first is the Asset allocation tool – which shows you some of the key concepts involved in picking which types of investment (e.g. shares or bonds) should go into your portfolio and how much of each type (e.g. 50% shares 50% bonds).

Research has shown that, if you have a diversified portfolio, the vast majority of your performance (in terms of volatility and returns you earn) is traced back to your asset allocation, with the selection of individual shares or bonds within each category being secondary and having far less impact.

The tool demonstrates some well-established financial principles to be aware of when thinking about your asset allocation, they are:

  • If you have big financial goals in the near term, a low risk tolerance, or a short investment horizon (e.g. if you are older) you should reduce the risk of your portfolio by investing more in high-quality bonds and cash rather than riskier share investments
  • You should think holistically about your asset allocation – remember your home and any pensions schemes are investments too
  • You can benefit by diversifying across asset classes, including both bonds and shares in your portfolio. Bonds and shares can in some cases react differently to changes in market conditions and so can offset each other reducing the volatility of your portfolio

When it comes to investing in shares or bonds we think index tracker funds are the obvious choice for most people vs share selection or actively managed funds. They have generally outperformed their actively managed counterpart over the long term due to lower fund charges, and share selection is too lengthy a process with investors needing to decide on at least 20 different shares to diversify their portfolio in the way a fund can instantly.

Remember that even though differences in fund charges can seem small they have a huge impact on overall performance over long investment periods.

When it comes to picking index funds there are some things to consider:

  • You can benefit by diversifying across multiple geographies, particularly if your income is linked to the health of the economy in which case you could be double hit if you are only invested in UK companies
  • You can benefit from diversifying across multiple sectors and company types

A lot of online investing platforms publish free research on market trends and specific shares (if you don't have a investing platform yet we cover that below).

How do I invest?

The easiest and cheapest way to invest is online via an online dealing platform.

A platform will set up the ‘nominee account’ and hold the shares on your behalf, so you do not have to deal with any additional paperwork. You are still the legal owner of any shares or bonds you buy, but your name will not appear on the company’s share register.

What is an ISA?

Everyone in the UK over 18 has an annual £20,000 tax free interest ISA allowance (for the 2020/21 tax year, ending 5 April 2021) meaning that any interest or gains are not subject to income tax. You can use all of this in an investment ISA, or you can split it across the range of different ISAs available (e.g. cash ISAs).


If you've invested more than your annual ISA allowance you can use a share dealing account but remember this comes with no tax benefits.