How to start
Opening an investment account
Once you have picked your investing platform and understand what you are getting into, you will be ready to open an account.
This is a really exciting moment, but also can make you feel a bit nervous as you are doing something new. Trust all of that research that you did though and remember that you are investing for the long-term.
What investment account should you open?
If you are in the UK you can take advantage of a Stocks & Shares ISA. You can have this alongside a cash ISA & Lifetime ISA so no need to worry.
ISAs are a tax-efficient account which means that you pay no tax on dividends received (your split of company profits) and you will also pay no tax if you sell any shares inside the ISA for a gain.
If you already have a Stocks & Shares ISA, you can have a General Investment Account and can earn up to £500 in dividends and make capital gains of up to £3,000 without having to pay any tax.
If you aren’t in the UK, drop us an email and we will put you in touch with one of our international partners.
How much should you invest?
This is the big question. I would recommend that you put in as much as you are comfortable doing, but make sure that the following are accurate before you pay any money into an investment account:
You have no high interest debt (credit cards, payday loans etc.)
You have an emergency fund in cash (ready for any random emergencies)
You are investing for 5+ years
Should you invest a lump sum or monthly amounts?
Everyone has their own opinions on this and there are so many studies which have been done looking at which option returns the highest percentage gains.
In my opinion, you should invest a nice sum at the start followed by consistent monthly investments.
For example, say you have £1,000 to invest and are able to invest £50 per month, this is what I would do if I were you:
Deposit when opening: £250
Monthly contributions: £50 + (£750 divided by how many months you plan to invest for)
Why should you invest?
What I’m trying to get across to you is a concept which is weird to understand when you first start investing. But, let me try and explain it:
If you are investing for the long term, and your portfolio suddenly starts to go down in value then this means the stocks or ETFs are cheaper than when you bought them previously.
Instead of getting scared that your investment won’t rebound and selling your investments for a loss, what you want to do instead is to invest more money.
This is how you get a lower average cost for your shares or ETFs and means that when/ if they rebound you will now have a higher profit than you would have previously.
This is something that you will learn with time, but is the most important concept to understand. The stock market as a whole, has never failed to recover from a crash - let that sink in; every time the market is red, it will go back to being green!
Please note that some particular risky stocks will crash and not return to their former glory - this is why ETF investing is often regarded as safe and less risky. You will have a much more broad exposure to the market.