How to invest for beginners in the UK.
When I started investing (just about a year ago) I heard about ISAs, investing accounts, commissions, fees… the list went on. I felt like I was never going to learn it all. Or anything at all.
I’ve talked before in my ‘things I wish I knew about money’
I think I should go into more detail. With a few of those steps.
Step 1 — Get an auto invest app and see what it’s investing.
Everybody has a smartphone. Maybe your grandad doesn’t but most people nowadays has one. If not set up a Stocks and shares ISA with your bank.
Rather than putting yourself in a position of choosing different stocks, etfs and bonds.
I remember the first thing I bought. It was in the moneyboxx app and it was a Emerging market fund. I researched if it was a good idea and kept looking around.
It can be very hard to start. The first thing I did open was a 212 account, which I highly suggest for step 2 but I’ll talk about that in a bit.
Maybe you don’t need this step either. It does take an extra bit of a percentage of fees than a different Stocks and shares account.
Head over to my website and see the discount section to see all the apps but I’ll link and mention a few above incase you didn’t want to. In anycase. A goggle search will help you just as much.
These will (Usually) choose different funds, etfs, Bonds. Very rarely, if ever, will they choose individual stocks.
As you start to get an idea of stocks and shares, etfs and bonds we will move to step 2.
Step 2 — Start choosing your investments a little more.
Get a broker. I would suggest 212. Find others over on my discount section where you can get free stocks or just google it. (Where if you use the link above you get a free stock.
My advice for this would be.
- Lowest fees possible 0.5% might not seem like a lot but compounded over time it really does add up. Check out my post on why I’m a dividend investor to check out a deeper look at compound interest and how it works. I will be doing a separate blog post on this later on but for now, it’s a good read.
Some fees can’t be removed but, for example HL have a £10 (The last time I seen their site) for trading stocks. That a lot on it’s own.
- Range — Are you going to be moving onto stocks? If so your going to want to consider how many the platform your going to use offers. Is that enough? Most of them are going to have the ‘big ones’.
- Simplicity — Your only a beginner (or a seasoned pro). So you want to start with simplicity.
- Find different ETFs. You should be learning about this during step 1…
You want to start to get some kind of, what I like to call a system, in place.
This just means what kind of investor are you? Do you believe in America and think it’s going to keep increasing? The NYSE and american etfs are going to be for you. Think Japan are going to get out of their average performance. Think China is the future? Look for chinese etfs and so on. What do you see in 5–10 years happening? If you don’t know… give it your best shot (of course don’t do something stupid like believe it’s bitcoin when you thought crypto was some kind of chocolate bar.) within reason of course…
The truth is no one knows whats going to happen. 2020 alone… well enough said.
This will give you an idea of what stocks you want to focus on too, if you are going to move onto the next step.
This was one of the hardest steps for me. I was overwhelmed. EM markets, Japan, China, FTSE 100 the options are endless. The S&P 500 was the one I decided to go with… take that information as you want. Just buy something.
Don’t go overboard. Try and stick to ETFs as they will grant you the best ROI. I would personally suggest looking for Dividend paying ETFs but Growth ones are just as good (depending on etf of course).
Great. For your average investor… this is a good place to be and where you might want to stop and repeat buying. Come back a couple months (or weeks) and buy more and reinvest your dividends if you have any.
Just make sure…
- Your diversification is high enough. Don’t just choose one or 2 ETF’s. Try to diversify. THink Japan will be the next America (… it’s just an example…) Invest into Japanese etfs but there is no harm in having EM, UK or American ETFs. Try and spread yourself like you would peanut butter on bread. Not to much but not to little.
- Keep with your strategy. People seen that the market was crashing due to covid and sold out. All progress (and potential recovery) gone. Yes if a crash happens your bound to lose some of your investment. Keep pushing through. If you believe in the UK, US… the world… to recover than don’t give up.
- One I should have mentioned earlier (which I did). Research! ETFs, normally, change from time to time. An example is tesla. It’s in the S&P 500. Different etfs change all the time. Make sure you know what and where your ETF is. The fees. Have they increased? Basic questions. I do this yearly/3/6 months depending on the etf. I’ll have another post about ETFs so it’s worth keep tuning in for.
You’ll start to get an idea of the good and the bad. Why your etf has gotten rid of different stocks within it and why they added others.
If your like me and like to personalise your portfolio a little more… Let’s go to the next stage…
Step 4 — Self proclaimed perfectionist!
Now. You got the basics down. You know ETFs, in the long run are probably going to outperform you (if history has anything to do with it).
But you want stocks. You shop at tescos and want to reap the benefits with them.
Your ready for stocks
There’s a couple things you need to know now. Were moving into more advanced stuff here so I’ll try and keep you with me but let me know if I lose any of you.
Your going to have to look at numbers, Dividend yields, growth vs Dividend stocks…
Just keep these in mind as your knowledge grow.
How long do you plan on keeping it?
Is it buy and hold? Is it a week or a month or a couple years? Ask yourself will it grow within that time frame?
I bought bitcoin recently (before the 6% spike) because I think crypto is going to be a good form of money in the future. I didn’t see the 6% spike in bitcoin as a big thing (make sure you do your research with Bitcoin because you can lose it all!).
My point with this? Bitcoin is a long term investment for me (and it might not work… it is high risk so do definitely do your own research!!! I can’t stress that enough). So if it jump 6% or falls 6% today it’s not that big a deal. Of course I want it to go up but I’m thinking more long term and want it to go up long term.
Before you fall asleep… I just need to mention this.
Think more about assets to liabilities…
See if the company is gaining or losing profit
Think more about it’s dividend and payout ratio.
Think about cash flow and if it could deal with a change in the economy if it would crash
I could spend forever giving you advice on different stocks and what you should be looking out for when it comes to their finances. But it comes to good vs bad companies.
Bad companies can disguise themselves as good companies but good companies don’t (and usually can’t) disguise themselves as bad ones.
If you want to move on from here. Do some research into trading. Investing is very much long term and, aside from keeping up to date with the investments you have every couple months and making sure the companies your invested in are good (financially, legally and all the rest) and you know your next couple investments…
There isn’t much more you can do after that. Even if you are putting that amount of time into it trading might be a good thing to start looking into. I mean if you don’t know what your doing you’ll lose your whole investment but if your spending all this time investing, it might be a good idea to start thinking about getting that higher ROI which requires a lot more time and effort.
(I take no financial responsibility for you choosing to this. Make sure you know and have a good idea of the risk involved because it’s much higher than investing).
Investing doesn’t have to be hard. It can be overwhelming, when I start I definitely felt it but taking it one step at a time can be really freeing.
Just starting is the hard part. Even if you don’t take anything else from this post take this…