The United Kingdom (UK) may be the fifth-largest national economy in the world, but it houses the world's second largest financial center after New York City. In fact, London is one of the largest cities in the world and has the highest city gross domestic product (GDP) in Europe. That makes the UK a very important financial hub for international investors.

The London Stock Exchange has a market capitalization of over $3 trillion, making it the fifth-largest stock exchange in the world. There are around 2,000 companies from over 100 countries listed on the exchange, including those from Africa, China, Latin America, Europe, and Asia.

Benefits and Risks Investing in the UK

Investing in the UK may be safer than many emerging and frontier markets, but there are still many risks that investors should take into account. Some benefits of investing in the UK include:

• Financial Hub: London has one of the most advanced financial markets in the world next to New York, which makes the securities market a very stable and liquid one for investors who are looking for exposure outside of the United States.
• Blue Chip Stocks: The UK is home to many of the largest blue chip companies in the world, ranging from Rio Tinto to BP to GlaxoSmithKline, which makes investing in the region less risky than other financial markets around the world.

Some risks to investing in the UK include:

• Service Economy: The UK's economy is made up of over 70% services, which is common among developed countries. While that can mean more stability, changes in consumer credit and commodity prices can quickly cause problems.
• Political Risks: Britain has left the European Union. Scotland has made similar threats to leave the United Kingdom. These kinds of threats could lead to economic volatility.

Invest in the UK with ETFs and ADRs

One easy way to invest in the UK is through exchange-traded funds (ETFs), which provide investors with diversified exposure in a single security that can be traded just like stocks. The most popular ETF in the market is the MSCI United Kingdom Index Fund (EWU), but there are several other funds that also have exposure to the region.

Here are some other popular ETFs to invest in the UK:

• BLDRS Europe 100 ADR Index Fund (ADRU)
• SPDR DJ STOXX 50 ETF (FEU)
• STOXX European Select Dividend Index Fund (FDD)
• BLDRS Developed Markets 100 ADR Index (ADRD)

But those who are looking for a more targeted approach can also purchase American depository receipts (ADRs), which are U.S.-listed securities that mimic the movement of a single foreign stock. These securities can give investors a way to invest in only certain companies or industries rather than a whole basket that spans many sectors, but note that ADRs may be less liquid and carry higher transaction costs than their domestic counterparts. Here are some popular ADRs to invest in the UK:

• Barclays plc (BCS)
• BP plc (BP)
• GlaxoSmithKline plc (GSK)
• Rio Tinto plc (RIO)
• BHP Billiton plc (BBL)

How to Directly Invest in the UK

Investors who are looking to take a more direct approach can also purchase stocks on the London Stock Exchange (LSE). While some U.S. brokerage accounts offer international trading capabilities, some investors may have to open foreign brokerage accounts. And all investors should carefully consider the tax implications of investing in the UK directly.

U.S. brokerages offer access to the London Stock Exchange, including companies like eTrade Financial Corporation and Interactive Brokers. Alternatively, popular UK stock brokerages include companies like Banco Santander's Abbey Sharedealing and Barclays Stockbrokers.

Investing is a long game. Whether you want to invest for retirement or grow your savings, when you put money to work in markets it’s best to set it and forget it. But successful long-term investing isn’t as simple as just throwing money at the stock market—here are seven tips to help you get a handle on long-term investing.

1. Get Your Finances in Order

Before you can invest for the long term, you need to know how much money you have to invest. That means getting your finances in order.

“Just like a doctor wouldn’t write you a prescription without diagnosing you first, an investment portfolio shouldn’t be recommended until a client has gone through a comprehensive financial planning process,” says Taylor Schulte, a San Diego-based certified financial planner (CFP) and host of the Stay Wealthy Podcast.

Start by taking stock of your assets and debts, setting up a reasonable debt management plan and understanding how much you need to fully stock an emergency fund. Tackling these financial tasks first ensures that you’ll be able to put funds into long-term investments and not need to pull money out again for a while.

Withdrawing funds early from long-term investments undercuts your goals, may force you to sell at a loss and can have potentially expensive tax implications.

2. Know Your Time Horizon

Everyone has different investing goals: retirement, paying for your children’s college education, building up a home down payment.

No matter what the goal, the key to all long-term investing is understanding your time horizon, or how many years before you need the money. Typically, long-term investing means five years or more, but there’s no firm definition. By understanding when you need the funds you’re investing, you will have a better sense of appropriate investments to choose and how much risk you should take on.

For example, Derenda King, a CFP with Urban Wealth Management in El Segundo, Calif., suggests that if someone is investing in a college fund for a child who is 18 years away from being a student, they can afford to take on more risk. “They may be able to invest more aggressively because their portfolio has more time to recover from market volatility,” she says.

3. Pick a Strategy and Stick with It

Once you’ve established your investing goals and time horizon, choose an investing strategy and stick with it. It may even be helpful to break your overall time horizon into narrower segments to guide your choice of asset allocation.

Stacy Francis, president and CEO of Francis Financial in New York City, divvies long-term investing into three different buckets, based on the target date of your goal: five to 15 years away, 15 to 30 years away and more than 30 years away. The shortest timeline should be the most conservatively invested with, Francis suggests, a portfolio of 50% to 60% in stocks and the rest in bonds. The most aggressive could go up to 85% to 90% stocks.

“It’s great to have guidelines,” Francis says. “But realistically, you have to do what’s right for you.” It’s especially important to choose a portfolio of assets you’re comfortable with, so that you can be sure to stick with your strategy, no matter what.

“When there is a market downturn, there’s a lot of fear and anxiety as you see your portfolio tank,” Francis says. “But selling at that time and locking in losses is the worst thing you can do.”

4. Understand Investing Risks

To avoid knee-jerk reactions to market dips, be sure you know the risks inherent in investing in different assets before you buy them.

Stocks are typically considered riskier investments than bonds, for instance. That’s why Francis suggests trimming your stock allocation as you approach your goal. This way you can lock in some of your gains as you reach your deadline.

But even within the category of stocks, some investments are riskier than others. For example, U.S. stocks are thought to be safer than stocks from countries with still-developing economies because of the usually greater economic and political uncertainties in those regions.

Bonds can be less risky, but they’re not 100% safe. For example, corporate bonds are only as secure as the issuer’s bottom line. If the firm goes bankrupt, it may not be able to repay its debts, and bondholders would have to take the loss. To minimize this default risk, you should stick with investing in bonds from companies with high credit ratings.

Assessing risk is not always as simple as looking at credit ratings, however. Investors must also consider their own risk tolerance, or how much risk they’re able to stomach.

“It includes being able to watch the value of one’s investments going up and down without it impacting their ability to sleep at night,” King says. Even highly rated companies and bonds can underperform at certain points in time.

5. Diversify Well for Successful Long-Term Investing

Spreading your portfolio across a variety of assets allows you to hedge your bets and boost the odds you’re holding a winner at any given time over your long investing timeframe. “We don’t want two or more investments that are highly correlated and moving in the same direction,” Schulte says. “We want our investments to move in different directions, the definition of diversification.”

Your asset allocation likely starts with a mix of stocks and bonds, but diversifying drills deeper than that. Within the stock portion of your portfolio, you may consider the following types of investments, among others:

• Large-company stocks, or large-cap stocks, are shares of companies that typically have a total market capitalization of more than $10 billion.
• Mid-company stocks, or mid-cap stocks, are shares of companies with market caps between $2 billion and $10 billion.
• Small-company stocks, or small-cap stocks, are shares of companies with market caps below $2 billion.
• Growth stocks are shares of companies that are experiencing frothy gains in profits or revenues.
• Value stocks are shares that are priced below what analysts (or you) determine to be the true worth of a company, usually as reflected in a low price-to-earnings or price-to-book ratio.

Stocks may be classified as a combination of the above, blending size and investing style. You might, for example, have large-value stocks or small-growth stocks. The greater mix of different types of investments you have, generally speaking, the greater your odds for positive long-term returns.

Diversification via Mutual Funds and ETFs

To boost your diversification, you may choose to invest in funds instead of individual stocks and bonds. Mutual funds and exchange-traded funds (ETFs) allow you to easily build a well-diversified portfolio with exposure to hundreds or thousands of individual stocks and bonds.

“To have true broad exposure, you need to own a whole lot of individual stocks, and for most individuals, they don’t necessarily have the amount of money to be able to do that,” Francis says. “So one of the most wonderful ways that you can get that diversification is through mutual funds and exchange-traded funds.” That’s why most experts, including the likes of Warren Buffett, recommend average people invest in index funds that provide cheap, broad exposure to hundreds of companies’ stocks.

6. Mind the Costs of Investing

Investing costs can eat into your gains and feed into your losses. When you invest, you generally have two main fees to keep in mind: the expense ratio of the funds you invest in and any management fees advisors charge. In the past, you also had to pay for trading fees each time you bought individual stocks, ETFs or mutual funds, but these are much less common now.

Fund Expense Ratios

When it comes to investing in mutual funds and ETFs, you have to pay an annual expense ratio, which is what it costs to run a fund each year. These are usually expressed as a percentage of the total assets you hold with a fund.

Schulte suggests seeking investments with expense ratios below 0.25% a year. Some funds might also add sales charges (also called front-end or back-end loads, depending on whether they’re charged when you buy or sell), surrender charges (if you sell before a specified timeframe) or both. If you’re looking to invest with low-cost index funds, you can generally avoid these kinds of fees.

Financial Advisory Fees

If you receive advice on your financial and investment decisions, you may incur more charges. Financial advisors, who can offer in-depth guidance on a range of money matters, often charge an annual management fee, expressed as a percentage of the value of the assets you hold with them. This is typically 1% to 2% a year.

Robo-advisors are a more affordable option, at 0% to 0.25% of the assets they hold for you, but they tend to offer a more limited number of services and investment options.

Long-Term Impact of Fees

Though any of these investing costs might seem small independently, they compound immensely over time.

Consider if you invested $100,000 over 20 years. Assuming a 4% annual return, paying 1% in annual fees leaves you with almost $30,000 less than if you’d kept your costs down to 0.25% in annual fees, according to the U.S. Securities and Exchange Commission. If you’d been able to leave that sum invested, with the same 4% annual return, you’d have earned an extra $12,000, meaning you would have over $40,000 more with the lower cost investments.

7. Review Your Strategy Regularly

Even though you’ve committed to sticking with your investing strategy, you still need to check in periodically and make adjustments. Francis and her team of analysts do an in-depth review of their clients’ portfolios and their underlying assets on a quarterly basis. You can do the same with your portfolio. While you may not need to check in quarterly if you’re passively investing in index funds, most advisors recommend at least an annual check in.

When you check up on your portfolio, you want to make sure your allocations are still on target. In hot markets, stocks might quickly outgrow their intended portion of your portfolio, for example, and need to be pared back. If you don’t update your holdings, you might end up taking on more (or less) risk with your money than you intend, which carries risks of its own. That’s why regular rebalancing is an important part of sticking with your strategy.

You might also double-check your holdings to ensure they’re still performing as expected. Francis recently discovered a bond fund in some clients’ portfolios that had veered from its stated investment objective and boosted returns by investing in junk bonds (which have the lowest credit ratings, making them the riskiest of bonds). That was more risk than they were looking for in their bond allocation, so she dumped it.

Look for changes in your own situation, too. “A financial plan is a living breathing document,” Schulte says. “Things can change quickly in a client’s life, so it’s important to have those review meetings periodically to be sure a change in their situation doesn’t prompt a change with how their money is being invested.”

The Final Word on Long-Term Investing

Overall, investing is all about focusing on your financial goals and ignoring the busybody nature of the markets and the media that covers them. That means buying and holding for the long haul, regardless of any news that might move you to try and time the market.

“If you are thinking short term, the next 12 months or 24 months, I don’t think that’s investing. That would be trading,” says Vid Ponnapalli, a CFP and owner of Unique Financial Advisors and Tax Consultants in Holmdel, N.J. “There is only one way of investing, and that is long term.”

Inflation poses a serious threat to the value of our savings. If inflation is six per cent and the interest rate on your savings is one per cent, your money is losing five per cent of its real value, or spending power. With inflation now expected to exceed even the Bank of England’s 7.25 per cent forecast peak this spring, and to remain high for quite a while as the impact of the Ukraine conflict feeds through into consumer prices, that situation isn’t going to improve quickly.

So cash Isas are a bit pointless?

It is essential to build up and maintain a good cash savings buffer before you think about doing other things with your money. But with inflation at 5.5 per cent and rising, and the best cash Isas currently paying 0.82 per cent for easy access and 1.16 per cent for a one-year fix, it is a bleak outlook for cash savers.

With the personal savings allowance, basic rate taxpayers can receive interest payments of up to £1,000 a year tax free from a normal savings account, and higher rate taxpayers can receive £500 of interest tax-free. With the best non-Isa savings accounts paying 0.8 per cent easy access and 1.55 per cent one-year fix, it would seem sensible for most people to use these for their cash savings and retain the option of using their Isa allowance for something else.

The latest government data showed that in 2020, about 61 per cent of Isa contributions went into cash Isas – despite ultra-low interest rates on cash deposits – and about 36 per cent into stocks and shares. Although in terms of overall value of funds, investing Isas made up 51 per cent, which perhaps reflects their stronger growth potential. The Financial Conduct Authority has expressed concern that too many people are missing out on higher returns by hoarding cash.

So how do I use my Isa allowance?

Those saving for the deposit on a home might look to a Lifetime Isa (Lisa) as the generous government top-ups on these will go a long way to compensating for the effects of inflation. But be aware of the rules and restrictions on how you access and use Lisa savings. You can pay a maximum of £4,000 into a Lisa in one tax year to get the maximum £1,000 top-up, so even if you do this, £16,000 of your Isa allowance will remain unused.

Whether you open a Lisa or not, if you are willing to think in the long term and leave your money untouched for several years, an investing, or stocks and shares, Isa is worth considering. Both the profits you make from the rising value of investments (capital gains) and the income you receive from dividends (also called yield) are protected from tax.

But isn’t now a crazy time to start investing?

Stock markets can be volatile over the short term. Over the medium to long term, however, they have a strong track record. While there is no guarantee that stock markets will rise, historical evidence is fairly clear that markets trend upwards over the long term.

The MSCI World Index of global developed market equities is currently about 68.2 per cent above where it was five years ago, which breaks down into annualised returns of 11 per cent, and 248.2 per cent above where it was 10 years ago, equivalent to annualised gains of about 13.3 per cent. That means even after taking fees into account, £1,000 invested in a simple global equities tracker ten years ago would now be worth more than £3,500.

Despite this, it can still be intimidating to put a lump sum into stock market-based investments at a time when international conflict and potential economic shocks are causing market volatility.

So how do I get into investing without taking too many risks?

On top of the fundamental willingness to remain invested for five or more years, there are two main things the newbie investor can do to mitigate against risk:

a) Choose a ready made portfolio or a multi-asset fund, which will spread their money across a variety of assets including equities and bonds, and this diversification will hopefully mean that if equities suddenly fall, then other assets will help to stabilise your portfolio.

Most Isa platforms offer several of these, with a choice of how much growth and risk is targeted, which means that anxious investors can choose a cautious option that will have less committed to equities and more to “defensive” assets. Of course, a cautious approach will limit how much growth is achieved in good times.

b) Drip-feed into your investments with monthly contributions. By buying into the market at different levels each month you are helping to smooth out volatility. And when the stock market falls you have the benefit that you are picking up more shares (because they cost less), which in the long term could provide high returns.

It’s important to remember that you do not even have to invest right now to use your Isa allowance: you can fund your account with cash before the end of the tax year to bag some or all of the 2021/22 allowance, and then either drip-feed that into investments, or just leave it there until you make your investment choices. If you don’t use your allowance, you lose it.

Adrian Lowery is personal finance analyst at Bestinvest.

Have the spare cash

Inflation is running at 3.1%, 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 3.9% return, you would end up with £7,348, according to investment firm Fidelity. That’s growth of £1,348 on your contributions. Carry on for 20 years and your profit rises to £6,193.

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 60.

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 100. 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.

Comparetheplatform.com offers a simple calculator to help you find the most appropriate and cheapest provider. “A percentage charge is better for portfolios up to £50,000, 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 £9.99 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 0.75%, which, on top of a 0.25% 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 £20,000 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 1974 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 140%.”

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.

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There is a popular myth that investing is for those with lots of knowledge and a tonne of money.

This is simply not true. There are a number of investment platforms where you can get started investing for as little as a £1.

The trick is to get in the habit of saving little and often, while taking advantage of tax-free wrappers like ISAs.

This article will cover:

If you interested in learning how to invest, check out our free Investing for beginners course.

Six ways to invest with little money

The first step is to sign up to a low cost investment platform. We have outlined our favourites here.

Most will allow you to open a stocks and shares ISA to protect your profits from the taxman. Check out our top stocks and shares ISAs.

Once you have done that, you need an investment strategy. Here are some tips to invest:

1. Drip-feed your cash into investments

You don’t need to have a lump sum to start investing. Actually investing small amounts of money regularly is better than investing a large lump sum in one go.

By investing a small amount of money each month you are less vulnerable to market fluctuations. You also inevitably end up buying more shares when they are cheap and fewer when they are expensive (which is known as pound-cost averaging).

Find out more: How to invest during a recession

2. Buy an index tracker

Exchange-traded funds or index funds track the performance of a stock market or asset class. We explain more on ETFs in our investment guide for beginners.

ETFs tend to be much cheaper than actively managed funds (where a stock picker selects investments on your behalf). They are a simple and cost-effective way to build a portfolio with little money.

You can put your money in an exchange-traded fund via an investment platform such as AJ Bell Youinvest, Hargreaves Lansdown* or Interactive Investor.

Find out more: How to choose investment funds

3. Use a robo-adviser

If you invest via a robo-adviser, you let an algorithm do the hard work for you in deciding where your money should be invested.

You can invest through an online fund platform such as Nutmeg or Evestor, which will create a portfolio for you.

The minimum investment with Evestor is just £1. For Nutmeg customers, the minimum investment is £100 or £500 depending on which types of investment account you choose.

It’s called a robo-adviser because it’s not a human fund manager or financial adviser looking after your money, making it a cheaper option.

Learn more: Best robo-advisers

4. Mitigate your risk

Diversify your assets; in other words, don’t put all your eggs in one basket.

This means spreading your cash across different asset classes, market sectors and countries. This can help level out any fluctuations in prices. 

Find out more: Guide to investment trends

5. Invest for the long-term

Investing small amounts of money every month might seem insignificant, but over 20 or 30 years, you could have built a very significant pot.

If you intend to keep your money invested for decades, you can afford to take more risk than someone who might need access to their cash in the next few years.

Investing is for the long-term because the longer your investment horizon, the more time you have to ride out the bad times as prices will recover.

Investing in a pension is a great way to do this because they attract tax relief from the government (and free cash from employers for those in workplace pension schemes).

If you’re looking for a ready-made personal, we have given Nutmeg five stars. We outline the top pension providers here.

6. Open a high-yield savings account

While lots of savings accounts are currently paying next to next to nothing, you could get a better deal if you don’t mind tying your money up for months or even years.

The best rates tend to come from regular saver accounts but they often have conditions attached, such as saving up a certain amount each month.

We list the top savings accounts where fixed term bonds and regular saver accounts emerge the winners.

Top rated ready-made stocks & shares ISAs

Our independent ratings can help you find a low-cost ready-made stocks and shares ISA

abrdn

abrdn Easy Option portfolio

Coutts

Coutts Invest

evestor

eVestor portfolio

What is the best investment for a beginner?

If you’re just getting started, you might want to read our beginner’s guide to investing here.

The best investment is one that you feel comfortable with considering your:

• Timeframe
• Goals
• Attitude to risk
• Experience

Only choose what you understand. If you know you want to invest in the stock market, but don’t feel confident investing in individual shares, it may be best to let a platform choose for you.

Here we outline the best investment platforms for beginners

What’s the best way to invest money for the short term?

If you are likely to need your money in less than five years, it’s best to leave the money in cash rather than invest.

The stock market could fall in the short term, meaning you would lose money on your investments if you tried to take it out when the market was down.

Tie up your money in a fixed-term cash ISA of between one and five years, or put it into a high-interest account like a regular savings account.

This may give you a slightly better rate of return than you would get with a normal savings account.

But be warned, interest rates are historically low at the moment so you won’t get a great return.

Should I use a savings account instead?

While it is prudent to have a pot of easily accessible cash in a savings account for emergencies, your money won’t grow beyond the interest offered by the bank.

Savings rates have been paltry ever since the financial crisis more than a decade ago. You can find the top paying accounts here.

While leaving your money in a cash savings account may feel like the safest option, the value of your pot is actually being eroded over time. That happens if the interest rate on the account does not keep up with inflation, which is the case with many accounts right now.

If you have more money to invest, read how to invest £10,000

Top rated self-invested stocks & shares ISAs

Barclays

Investment ISA

Setting up my account

Operating my account

How ISAs work

Investments and tax regulations

If you still have any questions, you can call us on 03456 10 20 20.

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Investing is essentially buying something that you think you will be able to sell at a higher price later on. 

Let’s clarify what investing isn’t: at one extreme, investing isn’t stashing your cash in a savings account nor is there one magic formula to investing.

While we all need cash in an instant-access account for emergencies, there’s no chance of you growing your money beyond the small amount your bank will pay in interest rates.

At the other end of the scale, investing isn’t gambling. If you make a wrong bet at your local bookies, you will lose all of your money.

In contrast, while you’re likely to experience losses when investing, you’re less likely to lose the lot and there is a chance you make up those losses over time.

Why invest? Here are three reasons:

1. Building up cash isn’t enough

Are you often shocked at the bill when you fill up with petrol or do your weekly shop? Yes, the cost of living is rising.

Buying the same amount of stuff is becoming more expensive over the long term. The low interest rates offered by banks and building societies are not enough to beat inflation which at the moment is 5.4%.

The average rate across all banks on easy-access accounts is currently 0.22%, compared to 0.56 per cent in February 2020, according to Moneyfacts.

2. Your money can really multiply in the long run

Let’s assume you invested £10,000 over five years (assuming 5% growth), and put the same amount in a savings account paying you an interest rate of 1%. After five years:

Savings pot = £10,510.

Investments = £12,763

And actually due to the impact of inflation eroding the spending power of the cash in your savings account, in real terms it would be worth even less. After 5 years, at the current rate of CPI at 5.5%, your savings pot would in fact be worth £8,087.

3. The power of compound interest

This is what Einstein called the “eighth wonder of the world”.

Imagine a snowball, rolling down a snowy hill. The longer it rolls down the hill, the more snow it captures, and the bigger it gets. And the bigger it gets, the larger a surface area it has to capture even more snow.

Now replace the snow with money. The longer you give an investment to grow, the better. You have your original investment, plus the return you make each year, and that in turn will earn interest.

Effectively the interest earns interest and so your money grows at a faster rate. The “snowball” effect.

Investing is essentially buying something that you think you will be able to sell at a higher price later on. 

Let’s clarify what investing isn’t: at one extreme, investing isn’t stashing your cash in a savings account nor is there one magic formula to investing.

While we all need cash in an instant-access account for emergencies, there’s no chance of you growing your money beyond the small amount your bank will pay in interest rates.

At the other end of the scale, investing isn’t gambling. If you make a wrong bet at your local bookies, you will lose all of your money.

In contrast, while you’re likely to experience losses when investing, invest money in stocks uk, you’re less likely to lose the lot and there is invest money in stocks uk chance you make up those losses over time.

Why invest? Here are three reasons:

1. Building up cash isn’t enough

Are you often shocked at the bill when you fill up with petrol or do your weekly shop? Yes, the cost of living is rising.

Buying the same amount of stuff is becoming more expensive over the long term. The low interest rates offered by banks and building societies are not enough to beat inflation which at the moment is 5.4%.

The average rate across all banks on invest money in stocks uk accounts is currently 0.22%, compared to 0.56 per cent in February 2020, according to Moneyfacts.

2. Your money can really multiply in the long run

Let’s assume you invested £10,000 over five years (assuming 5% growth), and put the same amount in a savings account paying you an interest rate of 1%. After five years:

Savings pot = £10,510.

Investments = £12,763

And actually due to the impact of inflation eroding the spending power of the cash in your savings account, in real terms it would be worth even less. After 5 years, at the current rate of CPI at 5.5%, your savings pot would in fact be worth £8,087.

3. The power of compound interest

This is what Einstein called the “eighth wonder of the world”.

Imagine a snowball, rolling down a snowy hill. The longer it rolls down the hill, the more snow it captures, and the bigger it gets. And the bigger it gets, the larger a surface area it has to capture even more snow.

Now replace the snow with money. The longer you give an investment to grow, the better. You have your original investment, plus the return you make each year, and that in turn will earn interest.

Effectively the interest earns interest and so your money grows at a faster rate. The “snowball” effect.

invest money in stocks uk alt="Young children with a large snowball">

Investing is a long game. Whether you want to invest for retirement or grow your savings, when you put money to work in markets it’s best to set it and forget it. But successful long-term investing isn’t as simple as just throwing money at the stock market—here are seven tips to help you get a handle on long-term investing.

1. Get Your Finances in Order

Before you can invest for the long term, you need to know how much money you have to invest. That means getting your finances in order.

“Just like a doctor wouldn’t write you a prescription without diagnosing you first, an investment portfolio shouldn’t be recommended until a client has gone through a comprehensive financial planning process,” says Taylor Schulte, a San Diego-based certified financial planner (CFP) and host of the Stay Invest money in stocks uk Podcast.

Start by taking stock of your assets and debts, setting up a reasonable debt management plan and understanding how much you need to fully stock an emergency fund. Tackling these financial tasks first ensures that you’ll be able to put funds into long-term investments and not need to pull money out again for a while.

Withdrawing funds early from long-term investments undercuts your goals, invest money in stocks uk, may force you to sell at a loss and can have potentially expensive tax implications.

2. Know Your Time Horizon

Everyone has different investing goals: retirement, paying for your children’s college education, building up a home down payment.

No matter what the goal, the key to all long-term investing is understanding your time horizon, or how many years before you need the money. Typically, long-term investing means five years or more, but there’s no firm definition. By understanding when you need the funds you’re investing, you will have a better sense of appropriate investments to choose and how much risk you should take on.

For example, Derenda King, a CFP with Urban Wealth Management in El Segundo, Calif., suggests that if someone is investing in a college fund for a child who is 18 years away from being a student, they can afford to take on more risk. “They may be able to invest more aggressively because their portfolio has more time invest money in stocks uk recover from market volatility,” she invest money in stocks uk. Pick a Strategy and Stick with It

Once you’ve established your investing goals and time horizon, choose an investing strategy and stick with it. It may even be helpful to break your overall time horizon into narrower segments to guide your choice of asset allocation.

Stacy Francis, president and CEO of Francis Financial in New York City, divvies long-term investing into three different buckets, based on the target date of your goal: five to 15 years away, 15 to 30 years away and more than 30 years away. The shortest timeline should be the most conservatively invested with, Francis suggests, invest money in stocks uk, a portfolio of 50% to 60% in stocks and the rest in bonds. The most aggressive could go up to 85% to 90% stocks.

“It’s great to have guidelines,” Francis says. “But realistically, you have to do what’s right for you.” It’s especially important to choose a portfolio of assets you’re comfortable with, so that you can be sure to stick with your strategy, no matter what.

“When there is a market downturn, there’s a lot of fear and anxiety as you see your portfolio tank,” Francis says. “But selling at that time and locking in losses is the worst thing you can do.”

4. Understand Investing Risks

To avoid knee-jerk reactions to market dips, be sure you know the risks inherent in investing in different assets before you buy them.

Stocks are typically considered riskier investments than bonds, for instance. That’s why Francis suggests trimming your stock allocation as you approach your goal. This way you can lock in some of your gains as you reach your deadline.

But even within the category of stocks, some investments are riskier than others. For example, U.S. stocks are thought to be safer than stocks from countries with still-developing economies because of the usually greater economic and political uncertainties in those regions.

Bonds can be less risky, but they’re not 100% safe. For example, corporate bonds are only as secure as the issuer’s bottom line. If the firm goes bankrupt, it may not be able to repay its debts, and bondholders would have to take the loss. To minimize this default risk, you should stick with investing in bonds from companies with high credit ratings.

Assessing risk is not always as simple as looking at credit ratings, however. Investors must also consider their own risk tolerance, or how much risk they’re able to stomach.

“It includes being able to watch the value of one’s investments going up and down without it impacting their ability to sleep at night,” King says. Even highly rated companies and bonds can underperform at certain points in time.

5. Diversify Well for Successful Long-Term Investing

Spreading your portfolio across a variety of assets allows you to hedge your bets and boost the odds you’re holding a winner at any given time over your long investing timeframe. “We don’t want two or more investments that are highly correlated and moving in the same direction,” Schulte says. “We want our investments to move in different directions, invest money in stocks uk, the definition of diversification.”

Your asset allocation likely starts with a mix of stocks and bonds, but diversifying drills deeper than that. Within the stock portion of your portfolio, you may consider the following types of investments, among others:

• Large-company stocks, or large-cap stocks, are shares of companies that typically have a total market capitalization of more than $10 billion.
• Mid-company stocks, or mid-cap stocks, are shares of companies with market caps between $2 billion and $10 billion.
• Small-company stocks, invest money in stocks uk, or small-cap stocks, invest money in stocks uk shares of companies with market caps below $2 billion.
• Growth stocks are shares of companies that are experiencing frothy gains in profits or revenues.
• Value stocks are shares that are priced below what analysts (or you) determine to be the true worth of a company, usually as reflected in a low price-to-earnings or price-to-book ratio.

Stocks may be classified as a combination of the above, invest money in stocks uk, blending size and investing style. You might, for example, have large-value stocks or small-growth stocks. The greater mix of different types of investments you have, generally speaking, the greater your odds for positive long-term returns.

Diversification via Mutual Funds and ETFs

To boost your diversification, you may choose to invest in funds instead of individual stocks and bonds. Mutual funds and exchange-traded funds (ETFs) allow you to easily build a well-diversified portfolio with exposure to hundreds or thousands of individual stocks and bonds.

“To have true broad exposure, you need to own a whole lot invest money in stocks uk individual stocks, and for most individuals, they don’t necessarily have the amount of money to be able to do that,” Francis says. “So one of the most wonderful ways that you can get that diversification is through mutual funds and exchange-traded funds.” That’s why most experts, including the likes of Warren Buffett, recommend average people invest in index funds that provide cheap, broad exposure to hundreds of companies’ stocks.

6. Mind the Costs of Investing

Investing costs can eat into your gains and feed into your losses. When you invest, invest money in stocks uk, you generally have two main fees to keep in mind: the expense ratio of the funds you invest in and any management fees advisors charge. In the past, you also had to pay for trading fees each time you bought individual stocks, ETFs or mutual funds, but these are much less common now.

Fund Expense Ratios

When it comes to investing in mutual funds and ETFs, you have to pay an annual expense ratio, which is what it costs to run a fund each year, invest money in stocks uk. These are usually expressed as a percentage of the total assets you hold with a fund.

Schulte suggests seeking investments with expense ratios below 0.25% a year. Some funds might also add sales charges (also called front-end or back-end loads, depending on whether they’re charged invest money in stocks uk you buy or sell), surrender charges (if you sell before a specified timeframe) or both. If you’re looking to invest with low-cost index funds, you can generally avoid these kinds of fees.

Financial Advisory Fees

If you receive advice on your financial and investment decisions, you may incur more charges. Financial advisors, who can offer in-depth guidance on a range of money matters, often charge an annual management fee, expressed as a percentage of the value of the assets you hold with them. This is typically 1% to 2% a year.

Robo-advisors are a more affordable option, invest money in stocks uk, at 0% to 0.25% of the assets they hold for you, but they tend to offer a more limited number of services and investment options.

Long-Term Impact of Fees

Though any of these investing costs might seem small independently, they compound immensely over time.

Consider if you invested $100,000 over 20 years. Assuming a 4% annual return, paying 1% in annual fees leaves you with almost $30,000 less than if you’d kept your costs down to 0.25% in annual fees, according to the U.S. Securities and Exchange Commission. If you’d been able to leave that sum invested, with the same 4% annual return, you’d have earned an extra $12,000, meaning invest money in stocks uk would have over $40,000 more with the lower cost investments.

7. Review Your Strategy Regularly

Even though you’ve committed to sticking with your investing strategy, you still need to check in periodically and make adjustments. Francis and her team of analysts do an in-depth review of their clients’ portfolios and their underlying assets on a quarterly basis. You can do the same with your portfolio. While you may not need to check in quarterly if you’re passively investing in index funds, most advisors recommend at least an annual check in.

When you check up on your portfolio, you want to make sure your allocations are still on target. Invest money in stocks uk hot markets, invest money in stocks uk, stocks might quickly outgrow their intended portion of your portfolio, for example, and need to be pared back. If you don’t update your holdings, you might end up taking on more (or less) risk with your money than you intend, which carries risks of its own. That’s why regular rebalancing is an important part of sticking with your strategy.

You bitcoin investimento wallet also double-check your holdings to ensure they’re still performing as expected, invest money in stocks uk. Francis recently discovered a bond fund in some clients’ portfolios that had veered from its stated investment objective and boosted returns by investing in junk bonds (which have the lowest credit ratings, making them the riskiest of bonds). That was more risk than they were looking for in their bond allocation, invest money in stocks uk, so she dumped it.

Look for changes in your own situation, invest money in stocks uk, too. “A financial plan is a living breathing document,” Schulte says. “Things can change quickly in a client’s life, so it’s important to have those review meetings periodically to be sure a change in their situation doesn’t prompt a change with how their money is being invested.”

The Final Word on Long-Term Investing

Overall, investing is all about focusing on your financial goals and ignoring the busybody nature of the markets and the media that covers them. That means buying and holding for the long haul, regardless of any news that might move you to try and time the market.

“If you are thinking short term, the next 12 months or 24 months, I don’t think that’s investing. That would be trading,” says Vid Ponnapalli, a CFP and owner of Unique Financial Advisors and Tax Consultants in Holmdel, N.J. “There is only one way of investing, and that is long term.”

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Contents:

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What is Investing?

Investing is a way of setting money aside with the expectation that your money will grow in value over time. When you invest, you are essentially putting your money towards assets in the hope that they will appreciate in the future. 

As the value of your assets appreciates, you make positive returns on your investments and generate some income along the way. In the same way, the value of your assets invest money in stocks uk also fall, and you could lose the money you invested.

Why invest in Stocks and Shares?

We all have financial goals. For some, it might be saving towards long-term goals such as living comfortably in retirement. For others, it might be saving towards significant life events such as buying a home or getting married. 

Whatever the goal, investing in stock and shares can be a great way to grow your money and can offer you higher long-term returns than leaving your money in a savings or current account. 

According to a 2019 Barclays Equity and Gilt survey, shares do better than cash nine times out of ten in any ten-year period. This reduces to seven times out of ten when investing for just five years.

People often ask how much money can be made in the stock market. On average, the value of your investment could rise by about 3 - 12% a year depending on a number of factors, but there are no guarantees.

The success or failure of your investment portfolio will usually depend on several factors, including:

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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 value of your investments appreciating, you can also earn regular income from some of the companies you invest in when they make a profit. This income is called a dividend. A dividend is your share of a company's profit.

As you progress in your investment journey, you will come across the phrase, "past performance is not a reliable indicator of future results". This is usually to let you know that sometimes your investments can fail, and no human or algorithm can predict how your investments will perform. A company's past performance cannot guarantee its future success, so the onus is on invest money in stocks uk to do your own research before investing in the stock market.

What is the Stock Market?

The stock market is a marketplace where shares make money images other assets are bought and sold. There are several stock markets around the world, and in the UK, the main exchange is the London Stock Exchange (LSE). 

The LSE offers trading in shares from big names you'll have heard of, such as Vodafone on its invest money in stocks uk market, to smaller companies such as ASOS listed on the Alternative Investment Market (AIM), its junior market. Anyone can buy shares on the London Stock Exchange, but you need to go through a stockbroker.

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When you start investing in the stock market, you'll come across invest money in stocks uk indices. In the UK, the main indices are the FTSE 100 (an index of the 100 largest companies on the LSE), the FTSE 250 (an index of the next 250 largest companies) and the FTSE All-Share (an index of all the shares listed on the LSE's main market). 

A market index is simply a group of shares of companies representing a particular segment. These companies invest money in stocks uk usually grouped by size and value.

Indices are used as benchmarks to gauge the movement and performance of market segments. For example, the FTSE 250 can be used to gauge the fortunes of the UK economy.

What should a Beginner invest in?

Beginners can invest in a variety of assets in the stock market. The major types of assets are stocks and shares, funds, bonds, commodities and properties.

1. Stocks and Shares: ‍A share is a unit of ownership of a public company. When‍ you buy a share, you own a tiny part of a public company. So, if you bought a share in Apple Inc., for example, you will become a part-owner of Apple. If it performs well, invest money in stocks uk, you'll benefit from its success. If it doesn't perform well, you may lose some money.
   
   Companies issue shares to raise money to fund their activities. People invest in shares to benefit from the successes of companies they believe in.
   
   You may also come across the word, stock or equity. In most situations, stocks, equities and shares refer to the same thing. Stocks could also mean all your shares in one or more companies.

1. Corporate Bonds: When you invest in a corporate bond, you are lending money to a invest money in stocks uk in return for interest.
   
   
2. Government Bonds: When you invest in a government bond or gilt, you are lending money to a government in return for interest.
   
   
3. Commodities: When you invest in commodities, you are investing in precious metals (gold, silver), oil, agriculture, etc.
   
   
4. Properties: When you invest in properties, as the name suggests, you are investing in real estate.
   
   
5. Funds: Instead of buying individual shares, bonds, properties, invest money in stocks uk, commodities or other assets directly, you can choose to 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, invest money in stocks uk, including those who are experienced investors, use funds when investing. To fully appreciate how to invest in funds, read our Investing in Funds guide.

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Also Read: Investing in the UK (in your 20s and 30s)

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How much Money should a Beginner have before Investing?

Before you start investing, it is important to separate the money you want to invest with from your emergency fund and everyday spending pot.

Your emergency fund should be equal to at least three times your monthly living expenses. This will prevent you from dipping into your investments if you find yourself in any form of major financial crisis like a job loss or severe health problem. Try to keep your emergency fund in a high-yield, easily accessible cash savings account like a cash ISA or a standard easy-access savings account.

You also want to have an everyday spending pot so that you do not feel the urge to cash out your investments every time you need to buy groceries or hang out with friends.

More importantly, it is crucial to consider your wider financial position before investing in the stock market. This might include paying off outstanding debts, invest money in stocks uk, such as a credit card bill or personal loan. Suppose you have £4,000 outstanding on a credit card charging invest money in stocks uk at 19%, it will cost you £760 a year to pay back the debt. Your investments are unlikely to match this return, so it might be wise to pay off the credit card debt and other expensive debts before investing.

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Once your finances are in order, you can invest as much or as little as you feel comfortable with. Most investment platforms and robo advisors will allow you to start investing with as little as £25 a month, and some even accept £1 a month. Investing small amounts regularly is known as 'drip-feeding' into your investment pot, and it can sometimes be better than investing a huge lump sum once.

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How to start investing in Stocks in the UK

Here is a breakdown of how to start investing in the stock market and a handy video on how to invest in funds (ETFs specifically) with InvestEngine:

1. Decide what you want to invest invest money in stocks uk First, you need to invest money in stocks uk what you want to invest in - shares, bonds, funds, commodities, properties? Most beginners start with funds. As explained above, funds save you the trouble of buying shares or other assets directly or worrying about building a diversified portfolio. They are also safer and cheaper than investing in individual shares since you share the risks and costs with other investors.

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1. Choose an investment platform: You can buy investments from providers such as banks, building societies, stockbrokers, fund supermarkets, robo advisors, trading apps and other financial institutions. The specific provider you choose will depend on your objectives, investing savviness and personal circumstances. Scroll down to learn more about choosing investment platforms.

1. Choose a tax wrapper: A tax wrapper reduces the amount of taxes you pay on your investments. Examples of tax wrappers in the UK are Individual Savings Accounts (ISAs) and pensions. Here are some examples:
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• ~~Stocks and Shares ISA: A Stocks and Shares ISA lets you invest your tax-free ISA allowance in qualifying investments such as shares, corporate bonds, government bonds (gilts) and funds. This tax year, your ISA allowance is £20,000. This means you can invest up to £20,000 in a Stock and Shares ISA, and you will not be taxed on any money you make on your investments. A Stocks and Shares ISA is also called an Investment ISA.
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• ~~Lifetime ISA: A Lifetime ISA is open to adults aged 18 and over but under 40 and lets you save up to £4,000 a year towards your first home or retirement. The government will add a 25% bonus to your savings every year up to a maximum invest money in stocks uk £1,000 per year.
  
  
• ~~Pensions: Tax relief is available from the government when you pay into a pension, but you can’t access the money until you are 55 when you can take 25% as a tax-free lump sum.
  
  
• ~~SIPPs: Self-invested personal pensions or SIPPs offer the same tax advantages as other pensions, but you have a greater opportunity to choose the underlying assets.
  
  

It is also worth mentioning that if you do not want to use a tax wrapper, perhaps because you have already used up your ISA allowance for the tax year, you can choose to invest in a general investment account (GIA). 

With the GIA, you are allowed to make up to £12,300 of gains tax-free. Additionally, the first £2,000 you receive in dividends is tax-free. Read our Stocks and Shares ISA guide for more information.

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Here's a video on how to invest in funds (ETFs specifically) with InvestEngine:

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Typical Investment Fees

We've outlined some typical investment fees below, focusing only on the fees charged by fund providers. Share-dealing platforms charge pretty similarly, so no need to worry about that for now.

Quick Tip: Fixed fees tend to work out cheaper for people investing high amounts, whereas percentage-based fees tend to be less expensive for those with little to invest.

1. Annual Platform Fee: This is charged by the investment provider for providing a platform for you to invest in.
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2. ‍Annual Fund Management Fee: Invest money in stocks uk known as Ongoing Charge Figures (OCF) or Total Expense Ratio (TER). This is the fee paid directly to the fund manager responsible for managing your funds. When you invest in funds, you typically select a few funds to invest in. If you selected three different funds, for example, you would be required to pay a fund management fee on each fund.
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3. Market Spread: Also known as transaction cost. This is the difference between the buy and sell price of an asset.
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4. ‍Annual Investment Cost: Some providers display this cost as the annual fund management fee plus the market spread.
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5. Trading Fee: Also known as dealing fee. This is the fee for buying and selling funds, shares or other types of investments on the platform. It usually ranges from £0 to £25.
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6. Transfer Out Fee: Also known as an exit fee. It is the fee you pay for moving your investments from one provider to another. Consider, for example, if you decide to move your investments from AJ Bell to Barclays, you’ll need to pay an exit fee. That said, not all platforms charge an exit fee. But the ones that do typically charge per fund or holding.
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7. Advice Fee (Optional): This is only paid if you opt-in for personalised financial advice.

Seven Top Tips for Investing in the Stock Market

Here are our seven top tips for investing in the stock market:

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1. The higher the risk, the higher the reward (or loss): The higher the return you want, the more risk you'll have to be willing to accept. It's usually wise to take on more risk when you are young with many years ahead of you to ride out market fluctuations. As you grow older, you'll be more inclined towards medium and low-risk investments.

1. Don’t put all your eggs in one basket: It is important to diversify your investments. This means investing in different asset types (e.g. shares, invest money in stocks uk, bonds) in various sectors (e.g. technology, food & beverage) and across different geographies (e.g. America, Europe, Emerging Markets). In practice, this is usually hard to achieve; that's why most people, including experienced investors, use funds when investing.

1. Invest for the long term: Investing for the long term is one of the most rewarding habits you can acquire. If you know you'll need your money in two or three years, for example, you should consider putting your money in a high-interest cash savings account. Investing should always be for the long term, at least five years. This way, you give your money enough time to ride out any fluctuations in the market. You can use a compound interest calculator to estimate your earnings over a specified period.

1. Consider investment charges carefully: Charges are important and can impact your overall returns. If an investment costs 2% and you receive a 5% return, your gain would reduce to just 3%.

1. Review your portfolio: Whether you hold funds or shares or both, it is vital to review your portfolio regularly, so you don't end up with dud shares or poor-performing funds. While we do not advocate selling your investments every time the market takes a hit, if you are convinced you've invested in a rubbish fund, you may want to sell it and invest your money elsewhere. Additionally, your investments will change in value over time, and some assets may not align with your objectives. When this happens, you may need to rebalance your portfolio to keep with your investment goals.

1. Don’t try to time the market: Since no perfect equation exists to tell us exactly how share prices will behave, trying to time the markets can be painfully futile. You may sell too quickly or buy too late. It is better to hold on to your investments through tough times and avoid making panic-driven decisions.
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2. Take advantage of tax-free accounts: When investing in the UK or other parts of the world, a rule of thumb is to always put the maximum amount in the tax-free account. In the UK, we have ISAs and pensions. These accounts are tax-efficient and help you limit your tax liability.

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Best Investment Platforms for Beginners

At Koody, we divide investment platforms into three categories based on the type of service and level of support or guidance they offer. The three categories are robo advisors, trading apps and investment platforms.

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Robo Advisors

Robo advisors are technology companies that provide automated financial planning with little or no human supervision. Their products include ready-made investments, managed investments and financial advice.

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Robo advisors are excellent for beginner investors or those who do not want to deal with the hassle of choosing individual stocks, invest money in stocks uk, shares and other investments themselves.

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Compare some of the best robo advisors in the UK below. To make sense of the charges, use our robo advisor invest money in stocks uk comparison table.

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Capital at risk. ISA rules apply. Other charges apply.

Setting up my account

Operating my account

How ISAs work

Investments and tax regulations

If you still have any questions, you can call us on 03456 10 20 20.

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Doubling your money is a badge of honor, often used as bragging rights at parties and around the Thanksgiving dinner table. Spurious promises to double one's money can also be made by overzealous advisors or worse, scamsters and fraudsters. Perhaps the urge to double one's money comes from deep in our investor psychology—the risk-taking part of us that loves the quick buck. When it comes to efforts to do so, however, two critical elements that are interrelated need to be considered: time and risk. This refers both to your (investing) time horizon and risk tolerance, as well as the attributes of the investment itself, such as the time it might take for the investment to double, which in turn is a function of the riskiness of the investment.

Time Horizon and Risk Tolerance

Your investing time horizon is an extremely important determinant of the amount of investment risk you can handle and is generally dependent on your ageand investment objectives. For example, invest money in stocks uk, a young professional likely has a long investment horizon, so they can take on a significant amount of risk because time is on their side when it comes to bouncing back from any losses. But what if they're saving to buy a house within the next year? In that case, their risk tolerance will invest money in stocks uk low because they cannot afford to lose much capital in the event of a sudden market correction, which would jeopardize their primary investment objective of buying a house.

Likewise, conventional investing strategy suggests that people in or near retirement should have their funds deployed in "safe" investments like bonds and bank deposits, but in an era of extremely low interest rates, that strategy carries its own risk, mainly of the loss of purchasing power through inflation. In addition, a retired individual in their 60s with a decent pension and no mortgage or other liabilities would probably have a reasonable amount of risk tolerance.

Let's now turn to the "time and risk" attributes of an investment itself. An investment that has the potential to double your money in a year or two is undoubtedly more exciting than one that may do so in 20 years. The issue here is that an exciting, high-growth investment will almost certainly invest money in stocks uk far more volatile than a staid, "Steady Eddy" type of investment. The higher the volatility of an investment, the riskier it is. This increased volatility or risk is the price an investor pays for the allure of higher returns.

How long does it take to double one's money?

The Rule of 72 is a well-known shortcut for calculating how long it will take for an investment to double if its growth compounds annually. Just divide 72 by your expected annual rate of return. The result is the number of years it will take to double your money.

When dealing with low rates of return, the Rule of 72 provides a fairly accurate estimate of doubling time. However, that estimate gets less precise invest money in stocks uk very high return rates, as can be seen in the chart below, which compares the estimates for "time to double" (in years) generated by the Rule of 72 and the actual number of years it would take for an investment to double in value.

Five Ways to Double Your Money

Doubling your money is actually a realistic goal that most investors can strive toward and is not as daunting a prospect as it may seem initially for a new investor. There are a few caveats, however:

• Be very honest with yourself (and your investment advisor, if you have one) about your risk tolerance; finding out you don't have the stomach for volatility when the market plunges 20% is the worst possible time to make this discovery and may prove very detrimental to your financial well-being.
• Don't let the two emotions that drive most investors—greed and fear—have an adverse impact on your investment decisions.
• Be extremely wary about get-rich-quick schemes that promise you "guaranteed" sky-high results with minimal risk, because there's no such invest money in stocks uk. Because there are probably many more investment scams out there than there are sure bets, be suspicious whenever you're promised results that appear too good to be true. Whether it's your broker, your brother-in-law, or a late-night infomercial, take the time to make sure that someone is not using you to double their money.

Broadly speaking, there are five ways to double your money. The method you choose depends largely on your appetite for risk and your timeline for investing. You may also consider adopting a mix of these strategies to achieve your goal of doubling your money.

1. The Classic Way—Earning It Slowly

Investors who have been around for a while will remember the classic Smith Barney commercial from the 1980s in which British actor John Houseman informs viewers in his unmistakable accent that "they make money the old-fashioned way—they earn it."

When it comes to the most traditional way of doubling your money, that commercial is not too far from the truth. The time-tested way to double your money over a reasonable amount of time is to invest in a solid, balanced portfolio that's diversified between blue-chip stocks and investment-grade bonds.

The S&P 500 Index—the most widely followed index of blue-chip stocks—has returned about 9.8% annually (including dividends) from 1928 to 2020, while investment-grade corporate bonds have returned 7.0% annually over this 93-year period. Thus, a classic 60/40 portfolio (60% equities, 40% bonds) would have returned about 8.7% annually during this time. Based on the Rule of 72, such a portfolio should double in about 8.3 years, and quadruple in approximately 16.5 years.

Note, however, that a significant amount of volatility generally accompanies such sterling results. Investors should brace themselves for occasional sharp drawdowns, such as the 35% plunge in the S&P 500 within a six-week period in the first quarter of 2020 as the coronavirus pandemic erupted worldwide, invest money in stocks uk.

In addition, very high returns compared to the historical norm may reduce the potential for future returns. For example, the S&P 500 recovered from its 2020 plunge in record time and powered its way to new record highs by year-end 2020. Although it returned a jaw-dropping total return of 100% from 2019 to 2021, such stellar returns may mean that future returns from the S&P 500 may be significantly lower.

What about real estate?

Real estate is another traditional way to build wealth, although it is a far less attractive proposition at times like the present when housing prices in North America have surged to record levels in many regions. The prospect of rising interest rates also reduces the appeal of real estate investment, invest money in stocks uk.

That said, during a real estate boom, the prospect of doubling one's money proves irresistible to many investors because the huge amount of leverage provided from mortgage financing can really juice up returns. For example, a 20% down payment on an investment property worth $500,000 would require an investor to plunk down $100,000 and get a mortgage for the balance of $400,000. If the property appreciates 20% to $600,000 in the next few years, the investor now has equity worth $200,000 in it, which represents a doubling of the original $100,000 investment.

2. The Contrarian Way—Blood in the Streets

Even the most unadventurous investor knows that there comes a time when you must buy, not because everyone is getting in on a good thing but because everyone is getting out, invest money in stocks uk.

Just as great athletes go through slumps when many fans turn their backs, the stock prices of otherwise great companies occasionally go through slumps, which accelerate as fickle investors bail out, invest money in stocks uk. As Baron Rothschild supposedly once said, smart investors "buy when there is blood in the streets, even if the blood is their own." invest money in stocks uk Nobody is arguing that you should buy garbage stocks. The point is that there are times when good investments become oversold, which presents a buying opportunity for investors who have done their homework.

Valuation metrics used to gauge whether a stock may be oversold include a company's price-to-earnings ratio and book value. Both measures have well-established historical norms for both the broad markets and for specific industries. When companies slip well below these historical averages for superficial or systemic reasons, smart investors smell an opportunity to double their money.

Being contrarian means that one is going against the prevailing trend. It therefore requires a greater degree of risk tolerance and a substantial amount of due diligence and research. As such, a contrarian strategy is best left to very experienced investors and is not recommended for a conservative or inexperienced investor.

3. The Safe Way

Just as the fast lane and the slow lane on the highway will eventually get you to the same place, there are quick and slow ways to double your money. If you prefer to play it safe, bonds can be a less hair-raising journey to the same destination.

Consider zero-coupon bonds, for example. For the uninitiated, zero-coupon bonds may sound intimidating, invest money in stocks uk. In reality, they're simple to understand. Instead of purchasing a bond that rewards you with a regular interest payment, you buy a bond at a discount to its eventual value at maturity.

One hidden benefit is the absence of reinvestment risk. With standard coupon bonds, there are the challenges and risks of reinvesting the interest payments as they're received. With zero-coupon bonds, there's only one payoff, and it comes when the bond matures. On the flip side, zero-coupon bonds are very sensitive to changes in interest rates and can lose value as interest rates rise; this is a risk factor to be considered by an investor who does not intend to hold a zero-coupon bond to maturity.

Series EE Savings Bonds issued by the U.S. Treasury are another attractive option for conservative investors who do not mind waiting a couple of decades for the investment to double. Series EE Savings Bonds are low-risk savings products that are only available in electronic form on the TreasuryDirect platform. They pay interest until they reach 30 years or the investor cashes them in, whichever comes first. Although the current rate of interest is witcher 2 make money paltry 0.10% for bonds issued between November 2021 and April 2022, they come with a guarantee that bonds sold now will double in value if held for 20 years. The minimum purchase amount is $25, while the maximum purchase per calendar year is $10,000. Savings bonds are exempt from state or local taxes, but interest earnings are subject to federal income tax.

4. The Speculative Way

Though slow and steady might work for some investors, others find themselves falling asleep at the wheel. For folks with a high degree of risk tolerance and some investment capital that they can afford to lose, the fastest way to super-size the nest egg may be the use of aggressive strategies such as options, margin trading, penny stocks, and in recent years, cryptocurrencies. All can super-shrink a nest egg just as quickly.

Stock options, such as simple puts and calls, can be used to speculate on any company's stock. For many investors, especially those who have their fingers on the pulse invest money in stocks uk a specific industry, options can turbocharge a portfolio's performance.

Each stock option potentially represents 100 shares of stock. That means a company's price might need to increase only a small percentage for an investor to hit one out of the park. Just be careful and be sure to do your homework before trying it, invest money in stocks uk.

For those who don't want to learn the ins and outs of options but do want to leverage their faith or doubts about a particular stock, there's the option of buying on margin or selling a stock short. Both these methods allow investors to essentially borrow money from a brokerage house to buy or sell more shares than they actually have, which in turn raises their potential profits substantially. This method is not for the faint of heart. A margin call can back you into a corner, and short-selling can generate infinite losses.

Lastly, extreme bargain hunting can turn pennies into dollars. You can roll invest money in stocks uk dice on one of the numerous former blue-chip companies that have sunk to less than a dollar. Or, you can sink some money into a company that looks like the next big thing. Penny stocks can double your money in a single trading day. Just keep in mind that the low prices of these stocks reflect the sentiment of most investors.

As Bitcoin has grown in popularity and become more mainstream, other cryptocurrencies have also emerged in recent years as one invest money in stocks uk the favored ways for speculators to make a quick buck. Though Bitcoin surged 60% in 2021, its performance pales in comparison to that of as many as 10 other cryptocurrencies (with a market cap of at least $10 billion) that soared 400% or more in 2021, such as Ethereum, Cardano, Shiba Inu, Dogecoin, Solana, and Terra (Solana and Terra gained more than 9,000% in 2021). Unfortunately, invest money in stocks uk cryptocurrency arena is a fertile hunting ground for scamsters, and there are numerous instances of crypto investors losing a great deal of money through fraud. Would-be cryptocurrency investors should therefore take the utmost care when putting their hard-earned money into any cryptocurrency.

5. The Best Way

Though it's not nearly as fun as watching your favorite stock on the evening news, the undisputed heavyweight champ is an employer's matching contribution in a 401(k) or another employer-sponsored retirement plan. It's not sexy and it won't wow the neighbors, but getting an automatic 50 cents for every dollar you save is tough to beat.

Even better is the fact that the money going into your plan comes right off the top of what your employer reports to the IRS. For most Americans, that means that each dollar invested costs them only 65 to 75 cents.

If you don't have access to a 401(k) plan, you still can invest in a traditional IRA or a Roth IRA. You won't get a company match, but the tax benefit alone is substantial. A traditional IRA has the same immediate tax benefit as a 401(k). A Roth IRA is taxed in the year the money is invested, but when it's withdrawn at retirement, no taxes are due on the principal or the profits.

Either is a good deal for the taxpayer. But if you're young, think about that Roth IRA. Zero taxes on your capital gains? That's an easy way to get a higher effective return. If your current income is low, the government will even effectively match some portion of your retirement savings. The Retirement Savings Contributions Credit reduces your tax bill by 10% to 50% of your contribution.