Thinking about investing? Here are a few things to consider

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If you’re new to investing, here are some things worth thinking about.

Investing: the basics

When you invest, you buy something that you hope will grow in value over time. The goal is to get back more than you paid for it when you come to sell it. Investments can include anything from pieces of art to gold, but typically refer to things like funds or stocks and shares. 

If you have a pension plan, you’ve already started investing, as money paid in is invested. But you might be thinking about investing in other ways – and this article could help you understand what sorts of things you’ll need to consider. 

Just one more thing before we get into it. When you’re thinking about investing, try asking yourself what your goals are. What are you planning to use the money for? And how long are you investing for? You’ll need to keep these questions in mind when making decisions. 

1. Pick your platform

There are a few different ways you can invest your money – most of the time this will be through a platform of some kind, like a Stocks & Shares ISA or online trading website, for example.

You’ll typically be charged for any platform you use, but the amount you’ll pay will vary from provider to provider. Different platforms and providers will offer different funds, stocks or other investing options, and you might find some platforms easier to use than others. All of these things can help you decide which platform is right for you. For example, if you want to be able to check up on your investments wherever you are, then you might want to go with a provider that offers an app.

If you’re considering a Stocks & Shares ISA, keep in mind you’ll get a £20,000 allowance which you can use across any ISAs you have. And any money you take out of your ISA (including any gains you make) won’t be taxed.

2. Work out how much risk you’re happy to take

Even though the goal is to grow your money, you have to accept that there’s risk involved with investing. There’s always a chance the value of your investments could go down as well as up and you might get back less than you paid in. 

Generally speaking, higher-risk investments have the potential to deliver higher returns over the longer term. But the value may go up and down more significantly and frequently, with more potential for losses. On the other hand, if you go for lower-risk investments, you’re less likely to see drastic falls in the value of your investments, but you might not see significant growth either.

How much risk you’ll be happy taking will probably depend on your age, how long you’re investing for, what your goals are and how much money you’d feel comfortable potentially losing.

Remember, it's important to review your investments as how much risk you're comfortable taking can change as your goals change.

3. Choose your investments

Once you’ve thought about your goals and how much risk you’re comfortable taking, you can consider the different types of investments you could go for.

There are different approaches you can take depending on how involved you want to be. There are options where you can pick specific stocks or investments and move around your money.  But there are some more hands-off options too. For example, you could choose to invest in a fund that includes a mix of investments and is managed by an investment manager on your behalf. 

You might choose to try to match up where you invest your money with your personal beliefs or principles. So you could choose to filter out investments that have a negative impact on things like climate change or human rights, for example.

And remember...

1. Think long term – If you want to invest, ideally you don’t want to touch that money for at least five years to give it a chance to grow. The longer you leave your money untouched, the more chance it has to recover from any short-term losses, although this isn't guaranteed.

2. Diversify – Spreading out your money across different types of investments and countries can also help spread out some of the investment risk, meaning you might be less likely to be impacted by sudden and sharp losses. For more information, you can check out the Financial Conduct Authority’s (FCA) website.

3. Try not to panic – Chances are, at some point your investments will lose value. But history has shown that markets have recovered from falls over time. So if you find yourself in a position where your investments are down, try not to panic and do think carefully if you’re tempted to sell them. Panicking and selling means you lock in that loss. And you could miss out on any eventual recovery too, but this isn't guaranteed. Remember, past performance isn't a guide to future performance.  

If you’re not sure about investing, it could be worth getting advice from a financial adviser. If you don’t have one, you can find one at Unbiased. 

 

The information in this article should not be regarded as financial advice and is based on our understanding in April 2024.

Remember that the value of pension plans and other investments can go down as well as up and you may get back less than was paid in.

Your own personal circumstances, including where you live in the UK will have an impact on the tax you pay. Laws and tax rules may change in the future.

Standard Life accepts no responsibility for information in external websites. These are provided for general information.