Sun. Oct 1st, 2023

How to invest safely in the UK

Making an investment is a good way to help grow your savings, without having to do much in the way of leg work. However, it does come with a certain amount of risk as you could end up getting back less than you put in. So how can you invest safely, if you’ve never done it before and are concerned that it might not be a worthwhile venture?

To start off with, it’s worth understanding the main points around investments, understanding how stocks and shares work and how you can get started, whilst understanding how risk works when it comes to investing. This understanding will allow you to have the knowledge to go ahead and start your investment journey with confidence.

As we all know, confidence doesn’t just come with a luscious beard and outstanding dress-sense (though it certainly helps the Guru), so read on for more valuable information about investing.

What is an investment?

An investment is a way to grow your savings over a long period of time by transferring money into stocks, shares, bonds, property, start up businesses, art or even cars. The advantage of doing this over a regular savings account is that you can get a much better return, but the downside is there is much more risk.

If your investment somehow doesn’t perform very well, for example a company’s share price going down instead of up due to poor performance or the economy taking a turn, this can lead to you losing money instead of gaining it. This risk is something you will have to agree to before you invest your money. Whilst it is likely you will see a return on your investment, nothing is certain when it comes to the performance of your investment.

That’s why if it’s your first time investing, you might be better off limiting the amount you invest, as well as investing in something that does not come with a high amount of risk.

Where do I start with investing?

Rather than jumping in the deep end, start off by researching investment platforms to see which one you would be comfortable investing through. An investment platform should answer the following questions:

  • What will I be investing in?
  • What is the minimum I can invest?
  • What is the minimum amount of time I should invest for?
  • What is the level of associated risk?

A full understanding of these answers will give you all that you should need for your first time investing. Of course, there are always additional questions you will have, so always check out the FAQ section of an investment platform so you know what will happen as your investment continues to grow.

 You should also make sure you know how to contact them in case you have any other urgent queries. If you don’t get your answers and feel confident in the platform, the process, or anything else, it might be worth putting your money elsewhere.

How much should I invest?

There will always be an indication of the minimum amount you should invest, but when it comes down to it, you should invest whatever amount you feel comfortable with.

By looking at the minimum amount that investment platforms require you to deposit, you can then work out how much is a good amount for that particular investment. If it seems too much for you then it might be best sticking to a standard savings account with no risk attached for the time being. Remember that investments usually work by depositing a larger amount that accumulates interest over a longer period.

How long should I invest for?

As mentioned above, investments are expected to last for years, rather than months, so you will have to be comfortable with isolating your savings for that time. It might be that you will have to invest your money for 5 years or more, so ensure that you aren’t leaving yourself in a precarious financial position. To start investing, you will need to be patient and understand that you will only see a return after a long period.

Also, you might not see a return at all if you are investing in a high-risk fund, therefore plan accordingly just in case it doesn’t work out, if that is the way you would like to invest.

Is investing right for me?

This is all about looking at your finances and being realistic with how much you can spare. If you have a comfortable income, a reasonable amount of savings and don’t expect that things will change over the next few years, making an investment might be right for you. Just do your research and make sure you understand the risk before you go ahead.

If, however, you have just moved jobs, are unsure about your current career path and are looking to change, or have struggled for a constant source of income, then it might be a better idea to keep your savings accessible for a time being, either in a current account or a savings account. There’s nothing wrong with this either – once you have a bit more job security and have built up your savings whilst wiping out any debts that need to be paid, you can start your investing journey.

In addition, if you have existing debts such as credit cards, loans or finance agreements, these need to take priority over any savings or investments. Not making regular repayments can lead to further debt and added penalties or interest that would wipe out any potential savings made in an applicable account.

What should I be looking out for?

  • Do your research – remember to find out all the basics; what you will be investing in, how much you will be investing, how long you will be investing and what is the associated risk. Only then should you considering moving forward with investing.
  • Don’t invest all your money in one place – investing comes with associated risk so try not to put all your eggs in one basket, so to speak. It is a much better idea to spread your savings and investments around, just in case one investment doesn’t work out. That way if something does take a turn, you will still be in a stable financial position.
  • Risk vs Return – higher interest rates mean a better return, but that also means a much higher risk of you not getting your money back, or at least getting less than you bargained for. As a first-time investor try to stick with low risk or medium risk funds to give you the best chance of seeing a good return.
  • Do not put yourself in financial jeopardy – if you’re struggling for money, have existing debts you need to pay or know that you will have to spend a lot of money in the next few years (moving house, getting married etc.), then hold off on making an investment. The money you invest will be locked away so if you need it, try to use an easy access savings account instead and save investing for the future.

Start your investment journey by checking out the investment platforms over on our Stocks and Shares ISA table. Good luck!


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