It has been a miserable time to be a saver – interest rates, which were already poor, have fallen further since the Bank of England cut its rate to a record low. At the same time, workers lucky enough to have kept their jobs during the coronavirus pandemic have saved thousands of pounds – and now they are looking at where to put it. Total retail bank deposits in the UK have jumped by £78bn since the start of the Covid crisis.

Perhaps it is no wonder that online trading in shares by small investors has taken off in recent weeks, with evidence of working-from-home employees dabbling in the markets on the side.

Hargreaves Lansdown, the biggest trading platform, reported a dramatic % rise in the number of trades placed between 24 March and 30 June compared with the same period last year. Interactive Investor, another of the big platforms, said its trading numbers were up %.

The sensible option for your new savings is to build up a rainy day fund equal to three months of your pay and to put additional sums into your pension and gain the tax relief. But what if you want to buy shares or funds to spice up your returns? How do you actually go about putting your money into an investment, without being bamboozled in the process?

How to start

There are about 25 reputable firms offering DIY trading platfoms, where you open an account and then choose which stocks or funds you want to buy. You will need to use one of these to get started.

Crucially, you receive no advice on what to buy and no recourse to compensation should your shares collapse in value. However, you are likely to get access to performance data and research.

To sign up, most sites ask for your national insurance number, your addresses over the past three years (they will not like it if you have moved more than twice in that period) and your debit card details. And you have to be over

You are likely to be asked to confirm your identity in some way, which may involve the site sending a letter to your home address, so it will take a few days before you can start investing.

It will make sense to open an Isa account with the trading platform, so the gains you (hopefully) make buying and selling shares and funds will be tax free.

Generally, you will have to pay a fee for managing the account – a percentage of how much money you keep at the site or a flat-rate annual charge. If you buy into a fund, you will also have to pay the manager’s charge, which is typically about 1% to % a year but some sites will partly discount that.

The best DIY options

The Lang Cat, a Scottish consultancy, every year analyses the various platforms’ costs and charges. For DIY investors, it recommends iWeb, Vanguard Investor and Interactive Investor.

The iWeb site is the Ryanair of investing, offering a cheap and basic no-frills service. The website looks a bit old-fashioned but it is ultimately owned by Lloyds Bank, which will give confidence to a lot of investors. It costs £25 to open an account, then there is a £5 flat-rate charge for each deal. You can choose from thousands of UK, European and US shares, exchange-traded funds and 2, conventional funds. It is near impossible to beat iWeb on price.

www.oldyorkcellars.com is the British arm of the world’s biggest fund management company and is also super-cheap. Vanguard is the king of index funds, allowing you to match the performance of indices such as the FTSE or the S&P on Wall Street while charging as little as % to hold a fund. They also have cheap ready-made portfolios, called LifeStrategy funds, which give you a mix of global shares and bonds.

Interactive Investor (www.oldyorkcellars.com) is good if you have maybe slightly more to invest. Lang Cat’s Mark Polson says of it: “The fixed fee is really useful for larger pots, service is improving, good for share trading, nice app and no exit fees.” The company recently set out a new flat-fee structure, with investors paying £ a month, which includes one free trade a month.

The best do-it-with-some-help options

These are the websites that don’t give you advice but do take you through a process of helping you understand how much risk you are happy to take and then provide ready-made investment options. Lang Cat recommends Hargreaves Lansdown, Fidelity Personal Investing and AJ Bell Youinvest.

Hargreaves Lansdown is the UK’s biggest investment website, with a long history of good service, although critics say it is relatively pricey. It has an annual charge of % of sums invested up to £,, plus £ for each share deal, dropping to £ for 20 or more deals in a month.

Fidelity Personal Investing is regarded as easy to use. It has an annual service fee of % to % of the sum invested, plus a dealing charge starting at £10 for a single trade but dropping for regular users.

AJ Bell Youinvest offers lots of ready-made portfolios and investment ideas. For share dealing, it charges £ to transact a deal, plus % of the value of the shares in your account up to a maximum of £ each quarter.

What should you buy?

If we knew the answer to this we probably wouldn’t be here now. But you can often see what other people are buying, if that helps. Interactive Investor says the top traded shares over its platform in August were Boohoo, BP, Amigo, Lloyds and Cineworld. The list also includes a small fintech stock, Supply@ME Capital, which appears to have caught the eye of day traders.

Fundsmith Equity remains top of the sales charts for funds but the long dominance of Vanguard’s cheap index funds is slipping under an onslaught of Baillie Gifford funds, which have enjoyed turbo-charged returns in recent months.

The golden rules of investing

Before you leap into share buying, remember the following:

• You can lose most or even all your money. Say you put lots of your money in Rolls-Royce shares in February, when they were at £7 each, thinking they were a blue-chip investment. Now they trade for only £ each.

• Don’t put all your eggs in one basket. Workers at Enron were encouraged to buy shares in their company. When it went bust, many did not only lose their job but their savings, too.

• Never invest after an unsolicited phone call. That hot tip is probably a dud from a “boiler room” seeking to offload worthless shares. Stick to only buying and selling through reputable platforms.

• You will never get in at the bottom and sell at the top. You can fantasise about buying the next Tesla and getting out with a huge profit. This almost never happens. One of the best skills in investing is acknowledging to yourself when you’ve made a mistake, taking hopefully only a small loss and then moving on. Don’t hold on to your losers.

• Buy and hold. The other stock market fantasy is trading in and out of shares and making profits every day. The mantra of the UK’s most successful money manager, Terry Smith of Fundsmith, is: “Buy good companies, don’t overpay, do nothing.”

Funds to avoid

Invesco is named as the worst performer among the major investment firms in the latest Spot the Dog analysis of investment funds.

The report, which has been published regularly since the mids, names and shames stock market investment funds that have consistently delivered poor returns in the markets they invest in. To gain a dubious place on the list, a fund has to underperform for three consecutive years.

Jason Hollands of Bestinvest, compiler of the report, said the “biggest beast” in the biannual parade of losers was the Invesco High Income fund, which has lost investors a third of their money over the past three years.

Invesco High Income was at one time managed by Neil Woodford, who left in to open his own funds – and investors who followed him were ensnared in one of the worst debacles in recent fund management history. Yet those who stayed with Invesco did little better, with his replacement, Mark Barnett, ousted this year after persistent underperformance.

Four of Invesco’s funds appear in the bottom 10 performers in the Spot the Dog “big beast” table.

Hollands said this year that performance disparities were wider than usual, with Covid wreaking havoc on markets.

Have the spare cash

Inflation is running at %, and finding a savings account paying above that is impossible. But many experts claim you can reasonably expect investments to grow by about 4% a year after fees are taken into account, or more if the stock market has a strong run.

If you invested £50 a month for 10 years and enjoyed a % return, you would end up with £7,, according to investment firm Fidelity. That’s growth of £1, on your contributions. Carry on for 20 years and your profit rises to £6,

If you are in it for the very long term, and are lucky, your returns may be supercharged thanks to the power of compounding. Like a snowball rolling down a hill, your investment earns returns, and those gains are reinvested and start earning returns, too.

However, remember investing means taking some risk – it’s possible investments could fall in value, so this isn’t for everyone. First, you need some cash set aside for emergencies, so allocate some of your savings to that. It’s also vital to tackle any expensive debt, such as credit or store cards, before diving into the stock market.

Assess your risk

Before choosing where to put your money, decide on your risk profile. In other words: how comfortable are you with seeing the value of your investments fall?

As a rule, the sooner you need your money, the less risk you should take. Online investment providers designed for self-starters, such as Nutmeg, Evestor, Wealthify, and sustainable investment provider Clim8, simplify this. Pick from a few investment options, rather than thousands of funds, after the providers have asked basic questions about your preferences and goals to match you to suitable options.

Start small

Investing a small amount every month is a great way to get started. You could, say, kick off with £25 a month into a single fund, although some providers will accept contributions from as little as £1.

Regular investing will help to iron out the highs and lows of the market. You buy more shares when the stock market is performing poorly and the price is lower, and fewer when their value rises.

You can invest a lump sum, too, if you have some cash savings you want to put to work in the stock market, for example, but this is a higher risk strategy as you might be buying at the top of the market.

Pick funds

Rather than buying shares in individual companies, funds are a good option for beginners. They hold a range of different companies, so you don’t have all your eggs in one basket.

“When it comes to choosing funds, I think of personal investors in three broad camps: ‘choose for me’, ‘help me choose’ and ‘I’ll choose myself’,” says Tom Stevenson, investment director at Fidelity International.

Many investment websites offer best-buy fund lists put together by experts, including Hargreaves Lansdown’s Wealth Shortlist, and Interactive Investor’s Super

There are two main fund types: index trackers and active funds. Trackers, also known as passive funds, follow a particular market index such as the FTSE They typically return the average of the market they invest in, and, as there is no one choosing the investments, they are the cheaper option.

Active funds are usually more expensive as they have a manager who chooses the shares they hold, aiming to beat the market.

You can pick from thousands of funds, such as those focusing on, for example, sustainable investments, smaller companies or emerging markets.

Holding a range of funds spreads your money and protects you from market falls. If one company falls in value, hopefully another will rise.

Go ready-made

If you don’t know where to start, you could go for a single, ready-made fund that holds investments from around the world.

Interactive Investor has a list of six quick-start funds. “These are well-diversified, multi-asset portfolios that are very competitively priced,” says Moira O’Neill, its head of personal finance. They include Vanguard’s LifeStrategy funds, each investing in thousands of global companies.

Alternatively, there are model portfolios on investment websites. These include a mix of some of the most popular funds and can be used as a template to build your own portfolio. AJ Bell Youinvest offers four ready-made options, tailored to whether you are cautious, balanced, adventurous or seeking income.

Check charges

Watch out for fees, as these can really eat into your returns. Investment providers either charge a percentage fee, based on how much you invest, or a fixed fee.

www.oldyorkcellars.com offers a simple calculator to help you find the most appropriate and cheapest provider. “A percentage charge is better for portfolios up to £50,, and Vanguard is the cheapest but has a limited selection of investments,” says Bella Caridade-Ferreira, the chief executive of Comparetheplatform.

If you are investing a larger lump sum, you will be better off with Interactive Investor, which charges £ a month, including one free trade a month, she adds. As your investment grows, charges stay the same with a flat fee.

You’ll pay for your investments on top of this fee, and to buy and sell funds. Average charges on active funds are about %, which, on top of a % service fee, brings the total to 1% a year.

Use your Isa allowance

Wrapping your investments in a stocks and shares Isa means you won’t pay tax on profits, or need to include them on your tax return.

This tax year you can invest up to £20, in an Isa wrapper. You can invest all, or some, of your allowance in a stocks and shares Isa, and hold any investments you wish.

Stay invested

Investing can be a bumpy ride, but it generally pays to hold your nerve. You need a time frame of at least five years, ideally far longer.

If you can sit tight through market falls your investments may bounce back and go on to be worth more.

“Great years can often follow terrible ones,” says Richard Hunter, head of markets at Interactive Investor. “In the UK was beset by recession, a miners’ strike, three-day weeks and an oil crisis – the FTSE All Share tanked 55%. The following year it rose by %.”

If you want further help before investing, seek assistance from a financial adviser, but you will need to pay. You can find one local to you online on Unbiased or VouchedFor.

The ‘traditional’ way to go public is through an IPO, in which an underwriter will sponsor a company’s public listing, setting a target share price. In this IPO process, a company’s financials will be heavily scrutinised before the listing, which helps to eliminate certain risks for institutional and retail investors because they’re able to make a more-informed decision.

Other ways that companies can go public include direct listings and SPACs. Direct listings enable a company to go public directly through a stock exchange. The company’s current employees and stakeholders will be able to convert their equity in the company into tradeable shares, which can then be issued through a stock exchange to the general public.

SPACs (special purpose acquisition companies) – sometimes known as reverse takeovers – are a more unorthodox way to go public, but there have been some high-profile examples in recent years. In basic terms, a SPAC is a shell company that’s set up with the sole purpose of carrying out an IPO, and then merging with a private company – taking the private company public in the process. Virgin Galactic is perhaps the most well-known company to have gone public through a SPAC.

As for why companies go public, there are several reasons. Most importantly – it’s a way to raise capital, which can help to fund expansion and further growth. Going public also carries a certain amount of prestige, especially if the company becomes a ‘blue chip’ – generally seen as the most stable companies in their sector.

Stability brings increased shareholder confidence, which will help to increase the company’s share price and subsequent market capitalisation. Eventually, a publicly listed company may start to look at acquiring other companies in its sector, and this can help to boost its own talent base – facilitating still further expansion.

Stock markets can be scary places for anyone new to investing: a mass of numbers, flashing screens and impenetrable jargon. A far cry from dropping coins into a piggy bank, or paying cash into a high street savings account.

If you’re saving for the future &#; five years away at the very minimum &#; investing in the stock market has the potential to produce greater rewards than cash on deposit. And it can also head off the corrosive effect of rising prices.

Here’s a run-through of investing basics, plus a look at the ways beginners can buy stocks and shares.

Note: before you consider going down the investing route, it’s sensible to build up a ‘rainy day’ cash fund worth at least three (and preferably six) months of your usual outgoings.

What is investing?

It’s worth starting with a definition of what investing is, and why people do it. Investing is the process of using your money to generate a profitable return (although it should be noted that investing carries with it the risk of loss, except where holdings are kept as cash).

The investing process involves putting your money into a range of investments.

What are these ‘investments’?

There are four main types, which you’ll hear referred to as ‘asset classes’. They include:

• cash &#; savings that you build up in a bank or building society account
• bonds &#; also known as ‘fixed-interest securities’. A bond is an IOU that pays its holder interest in exchange for a loan to the bond issuer. If the issuer is the UK government, the bond is known as a ‘gilt’. Companies also issue IOUs known as ‘corporate bonds’.
• property &#; an investment in bricks and mortar, either in the hope that a building’s value will rise, or that you’ll benefit from its rental income. Or a combination of both.
• stocks and shares &#; these are interchangeable terms, and they are also known as equities. Equity investing is where you buy a stake in a company either directly, or via a fund (a form of collective investment, where your money is pooled with that of potentially thousands of other investors). As a shareholder, you are a part-owner of a business, and you’ll share in both its financial successes and failures.

Other asset classes exist such as fine wine, art and classic cars. But mainstream financial products tend to focus on the above list.

An accumulation of assets is often referred to as a ‘portfolio’. There’s nothing to stop an investor focusing on just one asset type, but there’s an ‘all-your-eggs-in-one-basket’ risk associated with doing this.

Spreading your money among different asset classes &#; known as ‘diversification’ &#; is a sound investing policy.

Risks attached

Every investment carries a degree of risk, some greater than others. Generally, the higher an investment’s potential return, the higher the risk of losing your money.

In terms of the asset classes outlined above, the risk associated with each tends to increase as you read down the list.

For example, with savings accounts, the risk of UK savers losing their money is virtually zero thanks to strict compensation rules in place should a provider ever get into trouble (see our article on the Financial Services Compensation Scheme). 

The trade-off, however, is that the returns you can expect are modest at best, from virtually nothing up to around 2% a year.

With UK inflation running at well over 5%, this means that the real value of money held on deposit decreases year-on-year because of rising prices.

Bonds are riskier than cash because there’s the chance an issuer will not meet its interest payments and ‘default’. Again, the trade-off comes in the shape of a slightly higher rate of interest than cash, typically in the range 2% to 3%.

Shares and property have the potential to generate better returns and therefore sit at the top of the risk/return ladder. 

Share are often an investor’s first foray into stock markets, so that’s where we’ll focus on for the rest of this article.

Why buy shares?

Historically, the return on equity investments &#; between 3% and 6% a year going back over years, according to Credit Suisse &#; has outstripped other asset classes (although past performance is no guarantee for the future).

However, before parting with any cash, it’s worth taking time to weigh up whether investing in shares is definitely for you and to ensure you do it in a sensible and secure way.

Be prepared for ups and downs

With equity investing, you need to keep your ultimate financial goals in mind and be prepared to ride out stock market ups and downs.

Whichever method you choose (see below), there’s also a cost consideration. It doesn’t cost anything to open a deposit account with a high street bank. But, when buying shares, extra charges will be incurred beyond the cost of owning a piece of the company itself.

Investing in shares also means there may be tax considerations, for example, when selling part of your portfolio.

Before taking the plunge with any form of stock market-linked investment, ask yourself five questions:

• Should I get financial advice?
• Am I comfortable with the level of risk and can I afford to lose money?
• Do I understand the investment in question and could I get my money out easily?
• Are my investments regulated?
• Am I protected if an investment provider or my adviser goes out of business?

Types of investment 

There are several ways to invest. You can opt for one, some or all of the following. It boils down to your goals and how actively involved you’d like to be in managing your portfolio. The main options are:

• Buying individual shares. This is probably the most time-intensive option. You’ll need to do plenty of research and ‘own’ your decisions.
• Invest in share-based exchange-traded funds (ETFs). ETFs are a half-way house between buying shares direct (above) and buying funds (below). ETFs invest in a range of individual shares to track an underlying stock index such as the UK’s FT-SE Investing via ETFs is like buying into the companies that are on the same index. ETFs are traded on exchanges in the same way as companies, but offer greater diversification.
• Invest in collective/pooled investment funds. These are run by professional managers, who run portfolios of shares and other asset classes on behalf of investors. Funds focus on specific countries or geographic regions (such as the UK, the Far East) or sectors (such as technology). Actively managed funds are where managers decide which companies to include in their portfolio. Passively managed funds use algorithms to track the performance of a particular stock market index.

How can I start investing?

1) Open an investment account 

DIY investors require access to a dealing account, such as the ones offered by online investment platforms and trading apps. These provide would-be investors with a range of share dealing services.

Investment platforms are represented by some of the biggest names in stock broking and fund management and include the likes of Hargreaves Lansdown, interactive investor and Fidelity. Several providers have created a choice of ready-made portfolios featuring a range of investments based on the investor’s tolerance to risk.

Investors can also choose from an increasing array of dedicated share trading apps.

Some platforms provide users with the chance to practise trading using virtual money before taking the plunge for real.

No single investment platform or app is going to suit all types of user. Personal preference, look and feel, will play a part when making a choice. On top of these considerations, it’s important that a provider offers access to the investments you’re looking for.

It’s also to pay as little as possible for each trade you make and to minimise any other administration charges. Read more here about the charges levied by investment platforms and apps.

If you’re going to opt for the DIY investing route, consider opening a stocks and shares individual savings account (ISA). This is a tax-efficient savings product that acts as a wrapper around your investments, sheltering any profits from three key areas of tax: income tax, dividend tax and capital gains tax.

Most platforms enable investors to run a stocks and shares ISA within their service.

2) Choose a robo-adviser

If you have a sizeable amount to invest (say £10,) but the prospect of being responsible for all your own trades seems a little daunting, you could opt to use a robo-adviser.

Robo-advisors are a simple, inexpensive way to invest in stocks &#; a half-way house between a DIY approach (above) and full-blown face-to-face investment advice (below). You provide information on how much you earn, why you want to invest, your financial goals and attitude to risk and are given a ready-made investment portfolio by an automated system.

Once you’re up and running, the robo-adviser provides you with updates on your investment performance. This approach is convenient and relatively cheap &#; typically charging customers a few hundred pounds to get started. They’re also fast &#; you could have a live portfolio within an hour or two.

But because the process is automated and uses data provided by the customer, robo-advisers do not make intuitive recommendations. Depending on the provider you choose, there may also be limited choice in terms of the options on offer.

3) Choose a financial adviser or wealth manager

If you have a larger amount to invest, for example a six-figure inheritance or windfall, you could pay for the services of a financial adviser.

But you still need to decide what kind of advice you need and the goals you’re working towards. For example, are you investing with a particular event in mind, such as retirement?

You also need to decide your appetite for risk, how long you want to tie your money up for, and whether you need advice on different types of investment such as ones run according to ethical or environmental principles.

When you meet with an adviser, you should be given information including:

• Whether the advice is independent or restricted &#; restricted means an adviser is limited to the number of providers s/he can recommend. An independent adviser can access the whole market.
• Level of advice &#; are you looking for information to help inform a decision, or do you want an adviser to manage your investments?
• How much you’ll be charged &#; this may include an hourly rate, a set fee, a monthly retainer, or a percentage of the money being invested. Fees can vary so it’s worth shopping around.
• How your adviser is regulated &#; the firm should appear on a register published by the financial watchdog, the Financial Conduct Authority.

You can find out more information about financial advice from Citizens Advice. For lists of  independent and restricted advisers take a look at the Unbiased, Personal Finance Society and VouchedFor websites.