What Is Investing?

Simply put, investing is laying away money with the hope that its value will rise over time. If you want your money to grow, you should invest it in assets with the expectation that its value will rise over time.

When your assets increase in value, you receive favourable returns on your investments and possibly even earn some more money. Your investments may also go down in value and you may get back less than you put in.

Why Invest in Stocks and Shares?

What’s the Point of Buying Stocks?

We all have financial objectives. For some, it may involve saving for long-term goals such as retiring comfortably. Others may be saving for major life events such as purchasing a home or getting married.

Whatever your aim, investing in stocks and shares can be a terrific method to grow your money and provide you with higher long-term returns than leaving it in a savings or current account.

According to a 2019 Barclays Equity and Gilt survey, shares outperform cash nine out of ten times over a ten-year period. When investing for only five years, this drops to seven times out of ten.

People frequently inquire about how much money may be produced in the stock market. The value of your investment could improve by 3 – 12% per year on average, depending on a variety of circumstances, but there are no guarantees.

Your investment portfolio’s success or failure is usually determined by a number of factors, including:

1. The number of assets in your portfolio.
2. The extent of diversification of your portfolio.
3. The performance of each asset.
4. The length of time you hold each asset.
5. The investment fees.

Apart from the appreciation in the value of your investments, you can also earn regular income from some of the firms in which you invest when they generate a profit. This is referred to as a dividend. A dividend is a portion of a company’s profit that you get.

You will come across the statement “previous performance is not a reliable sign of future results” as you move through your investment journey. This is normally to inform you that your investments may fail at times and that no person or machine can anticipate how they will perform. Because a company’s past performance cannot guarantee future success, you must conduct your own research before investing in the stock market.

What Exactly Is the Stock Market?

The stock market is a marketplace for the purchase and sale of stocks and other assets. There are various stock exchanges around the world, with the London Stock Exchange serving as the primary exchange in the United Kingdom (LSE).

The LSE trades shares in firms ranging from well-known names like Vodafone on its main market to smaller companies like ASOS on its junior market, the Alternative Investment Market (AIM). On the London Stock Exchange, anyone can buy shares, but you must go through a stockbroker.

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When you begin investing in the stock market, you will encounter market indices. The main indices in the United Kingdom are the FTSE 100 (an index of the LSE’s 100 largest firms), the FTSE 250 (an index of the next 250 largest companies), and the FTSE All-Share (an index of all shares listed on the LSE’s main market).

A market index is basically a collection of company shares that represent a specific market segment. These businesses are typically classified according to their size and value.

Indices are used as benchmarks to assess market sector movement and performance. The FTSE 250, for example, can be used to forecast the fortunes of the UK economy.

What Should a Beginner Invest in?

In the stock market, beginners can invest in a number of assets. Stocks and shares, funds, bonds, commodities, and real estate are the most common types of assets.

1. Shares and Stocks: A share is a unit of ownership in a publicly traded firm. When you purchase a share, you are purchasing a small portion of a publicly traded corporation. As an example, if you purchase a share of Apple Inc., you will become a part-owner of Apple. You will benefit from its success if it performs successfully. You may lose money if it does not function well. Companies issue stock to raise funds to fund their operations. People buy stock to profit from the success of firms they believe in. You may also hear the terms stock or equity. Stocks, equities, and shares all relate to the same item in most cases. Stocks can also refer to all of your shares in one or more firms.
2. Corporate Bonds: When you invest in a corporate bond, you are lending money to a company in return for interest.
3. Government Bonds: When you buy a government bond or gilt, you are effectively giving money to the government in exchange for interest.
4. Commodities: When you invest in commodities, you are buying precious metals (gold and silver), oil, agricultural products, and so on.
5. Properties: As the name implies, when you invest in properties, you are investing in real estate.
6. Funds: Instead of purchasing individual shares, bonds, real estate, commodities, or other assets, you can invest in a mutual fund.

A mutual fund (or fund) gathers money from you and other investors, and a specialist fund manager invests this money in assets such as shares, bonds, properties or commodities, saving you the trouble of buying shares in multiple companies or worrying about building a diversified portfolio.

Investing in funds is safer and cheaper than investing in individual stocks, bonds or commodities since you share the risks and costs with other investors. Funds can be active (actively managed funds), passive (index funds) or traded on a stock exchange (exchange-traded funds – ETFs).

Most people, including those who are experienced investors, use funds when investing. To fully appreciate how to invest in funds, read our Investing in Funds guide.

How Much Money Should a First-Time Investor Have Before Investing?

Before you begin investing, it is critical to separate the funds you intend to invest from your emergency fund and daily spending account.

Your emergency reserve should be at least three times the amount of your monthly living expenditures. This will keep you from delving into your investments if you have a large financial catastrophe, such as a job loss or a serious health problem. Keep your emergency fund in a high-yielding, quickly accessible cash savings account, such as a cash ISA or a traditional easy-access savings account.

You should also have an everyday spending fund so that you don’t feel compelled to cash out your investments every time you go shopping or hang out with friends.

More importantly, before investing in the stock market, you must analyse your whole financial situation. Paying off outstanding obligations, such as a credit card payment or personal loan, may be included. If you owe £4,000 on a credit card with a 19% interest rate, it will cost you £760 a year to repay the debt. Because your investments are unlikely to match this return, it may be prudent to pay off credit card debt and other high-interest loans before investing.

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When your funds are in order, you can invest as much or as little as you like. Most investment platforms and robo advisers enable you to begin investing with as little as £25 per month, while some accept as little as £1 per month. Investing little amounts on a regular basis is known as “drip-feeding” into your investment pot, and it can often be more advantageous than investing a large lump sum all at once.

‍How to Invest in Stocks in the UK

To invest in stocks in the UK, you must first decide what you want to invest in (for example, shares, bonds, funds, ETFs, commodities, etc.), then select an investment platform, stockbroker or financial adviser, and then select a tax wrapper.

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Here’s an explanation of how to get started investing in the stock market, as well as a helpful video on how to invest in funds (particularly, ETFs) with TRESORFX:

1. Determine where you want to put your money: First, you must determine what you want to invest in: stocks, bonds, funds, commodities, or real estate. Most newcomers begin with money. As previously said, funds save you the effort of directly purchasing shares or other assets or thinking about developing a diverse portfolio. They are also safer and less expensive than investing in individual shares because the risks and costs are shared with other investors.
2. Select an investment platform: Investments can be purchased from financial institutions such as banks, building societies, stockbrokers, fund supermarkets, robo advisers, trading applications, and others. The precise provider you select will be determined by your goals, investment knowledge, and personal circumstances.
3. Choose a tax wrapper: A tax wrapper helps you pay less tax on your investments. Individual Savings Accounts (ISAs) and pensions are examples of tax shelters in the United Kingdom. Here are a couple such examples:

• Stocks and Shares ISA: A Stocks and Shares ISA allows you to use your tax-free ISA allocation to invest in qualified investments such as stocks, corporate bonds, government bonds (gilts), and funds. Your ISA allowance is £20,000 this tax year. This implies that you can invest up to £20,000 in a Stock and Shares ISA and not be taxed on any profits you make. An Investment ISA is another name for a Stocks and Shares ISA.
• Lifetime ISA: A Lifetime ISA is available to anyone aged 18 to 40 and allows you to save up to £4,000 per year for your first house or retirement. Every year, the government will add a 25% bonus to your savings, up to a maximum of £1,000 each year.
• Pensions: The government offers tax breaks when you contribute to a pension, but you can’t access the money until you’re 55, when you can withdraw 25% as a tax-free lump payment.
• SIPPs: SIPPs, or self-invested personal pensions, provide the same tax benefits as regular pensions, but you have more control over the underlying assets.

It’s also worth noting that if you don’t want to utilise a tax wrapper, possibly because you’ve already used your ISA allocation for the year, you can invest in a normal investing account (GIA).

The GIA allows you to realise tax-free gains of up to £12,300. Furthermore, the first £2,000 in dividends is tax-free. For more information, see our Stocks and Shares ISA guide.

Typical Investment Fees

We’ve included some typical investment expenses below, concentrating solely on fund provider fees. For the time being, there is no reason to be concerned about how share-trading platforms charge.

Quick Tip: Fixed costs are less expensive for individuals with a large amount to invest, whereas percentage-based fees are less expensive for those with a little amount to invest.

1. Annual Platform Fee: This is the fee charged by the investment provider for offering a platform on which you can invest.
2. Annual Fund Management Fee: Ongoing Charge Figures (OCF) or Total Expense Ratio are other terms for the same thing (TER). This is the fee paid directly to the fund manager in charge of your funds. When investing in funds, you usually choose a few funds to invest in. If you choose three separate funds, for example, you’d have to pay a fund management fee on each one.
3. Market Spread: Also referred to as transaction cost. This is the difference between an asset’s buy and sell price.
4. Annual Investment Cost: This cost is displayed by some providers as the annual fund management fee plus the market spread.
5. Trading Fee: Also known as a transaction fee. This is the cost for using the platform to buy and sell funds, shares, or other types of investments. It normally runs between £0 and £25.
6. ‍Transfer Out Fee: Also referred to as an exit charge. It is the cost of switching your investments from one supplier to another. Consider that if you decide to transfer your interests from AJ Bell to Barclays, you will be required to pay an exit charge. However, not all sites impose a departure fee. However, those who do usually charge per fund or holding.
7. Advice Fee (Optional): This is only paid if you choose to receive personalized financial advice.

Seven Top Tips for Investing in the Stock Market

Here are our seven best stock market investing tips:

1. The higher the risk, the higher the reward (or loss): The more the profit you seek, the greater the risk you must be willing to bear. When you are young and have many years ahead of you, it is usually advisable to take on greater risk in order to ride out market swings. As you get older, you’ll gravitate toward medium and low-risk assets.
2. Don’t put all your eggs in one basket: Diversifying your investments is critical. This entails investing in multiple asset classes (e.g., stocks, bonds), industries (e.g., technology, food and beverage), and regions (e.g. America, Europe, Emerging Markets). In practise, this is frequently difficult to achieve; this is why most people, including experienced investors, invest through funds.
3. Invest for the long term: Long-term investing is one of the most rewarding habits you can develop. If you know you’ll need your money in two or three years, for example, you should put it in a high-interest cash savings account. Investing should always be done over a five-year period. This gives your money adequate time to ride out any market swings. A compound interest calculator can be used to estimate your profits over a given time period.
4. Consider investment charges carefully: Charges are crucial and might have an impact on your overall results. If you make a 2% investment and earn a 5% return, your gain is only 3%.
5. Review your portfolio: Whether you own funds, stocks, or both, it is critical to check your portfolio on a frequent basis to avoid investing in dud stocks or underperforming funds. While we do not recommend selling your investments every time the market falls, if you believe you have invested in a bad fund, you should sell it and invest your money elsewhere. Furthermore, the value of your investments will fluctuate over time, and some assets may not correspond with your goals. When this happens, you may need to rebalance your portfolio to stay on track with your investing objectives.
6. Don’t try to time the market: Because there is no perfect equation that can predict how share prices will behave, attempting to timing the markets can be excruciatingly useless. You can sell too soon or acquire too late. It is preferable to stay on to your investments during difficult times rather than making hasty selections.
7. Take advantage of tax-free accounts: A good rule of thumb to follow while investing in the UK or other parts of the world is to always put the maximum amount in the tax-free account. In the United Kingdom, we have ISAs and pensions. These accounts are tax-advantaged and can help you reduce your tax liability.

Best Investment Platforms for Beginners

Answerswow divides investment platforms into three categories based on the type of service and level of support or advisory they provide. The three types are robo advisors, trading apps, and investment platforms.

Thanks to world-leading investment advisory, TRESORFX now anyone can invest safely in a managed investment portfolio and earn even a stable up to 50% return on investment monthly. Tresorfx offers a free sign-up, and a free consultation so you can choose an investment package that best fits your risk appetite.

Frequently Asked Questions:

1. Is it possible to lose more money than you invest?

Yes, you can lose more money than you invested in the stock market. That’s why it’s advisable to use a managed investment portfolio from Tresorfx.com instead of risking on your own your hard-earned money.

However, the only time you lose money in the stock market is when you have to sell your investments during a terrible year. If you can keep your assets even when the market falls, things should improve in the coming years, but there are no guarantees.

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You could potentially lose money if you just invest in one firm and that company collapses. Investing in a single firm is the riskiest thing you can do in the stock market. Ideally, you should invest in at least ten companies from various industries and even locations. We recognise that constructing such a diverse investment portfolio can be difficult; this is why most investors, even experienced ones, invest in funds. Stick with a managed portfolio by Tresorfx and you will enjoy watching your investment grow every day without stress.

2. Can you make a lot of money in stocks?

Yes, investing in stocks might make you a lot of money, but it can also cost you a lot of money. Remember that the stock market is not a place to make money. It is a place where you can increase your riches.

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Building a firm or getting hired in an established company is the best approach to create riches. Depending on your circumstances, the firm you construct may generate passive or active wealth for you. As an employee, you actively create wealth by coming to work and earning a wage.

Cutting costs is the second best method to create money. The difference between your income and expenses is what builds wealth. We cannot emphasise this enough. Don’t let society pressure you into overspending. If you need to track your expenses to better understand your spending, utilise TRESORFX’s free budget software.

Improving your skills is the third best strategy to create riches. Best-selling novelist Hal Elrod has one of our favourite quotes. “Your level of success will rarely exceed your level of personal development since success is something you attract by becoming the person you become,” he wrote.

When you have created wealth, you can invest and expand it in the stock market. Depending on your circumstances, wealth can range from £1 to £1 billion or more. Many investment platforms now allow you to get started with as little as £25 per month. Some will even take £1 per month.

3. How do I research what to invest in?

There are numerous methods for determining what to invest in. For company news, research, and analysis, we recommend the following websites: Motley Fool, ADVFN, Hargreaves Lansdown, Interactive Investor, CNBC, The FT, and Reuters. Also, check out Bestinvest’s Spot the Dog guide, which identifies underperforming funds that you should avoid. Finally, we provide a list of the top stocks to buy right now (according to Tresorfx).

4. How much money should a beginner invest for the first time?

As a first-time investor, you can invest as much or as little as you feel comfortable with. Most investment platforms and robo advisers enable you to begin investing with as little as £250 per month, while some accept as little as £10 per month.

5. How can I invest with little money?

Here are some of the finest ways to invest with a small amount of money:

1. Robo investing: is computerised financial planning provided by robo advisors. It is an easy way to invest in hundreds of stocks, bonds, and funds directly from your smartphone, eliminating the need to select individual stocks, shares, or other types of assets. You can begin robo investing with just £100.
2. Automatic Investing: When you sign up for auto-investing, you authorise a finance app to invest your spare change in the stock market on a regular basis. Automatic investment applications employ technology to evaluate how much you can afford to invest and then invest it automatically for you.
3. Direct Debits (Regular Investing Service): Most investment platforms allow you to invest small amounts on a monthly basis using their regular investing service. Regular investment dealing fees are typically lower than regular dealing fees. Some platforms don’t even charge a fee for frequent investing.

For more information on how to invest, check out these investing books.