Five ways to get started investing

Starting out investing doesn’t have to be tricky. When you start it’s easy to be bamboozled by jargon or feel like it’s all too complicated. But there are some easy ways to get going and set yourself up for success on your investing journey.

If you want to get to grips with the basics, check out our first-time investor guide to learn more. Or read on to see some easy hacks to make investing easy-peasy.

1. Make it regular

One way to take some of the thought and worry out of investing is to automate it. If you know you’ll have a bit of spare money left at the end of each month that you want to invest, then set up a regular payment.

This automatically moves money from your current account into your investment account, like a direct debit, and means you don’t have to remember to do it each month.

Work out how much you want to invest and then set the amount; it can be as little as £25. Remember, you can always add a lump sum deposit to it every few months if you find yourself with more money to spare.

If you want to go one step further, you can then set up regular investments so that money is automatically invested. Pick which funds or shares you want to add to each month and set it up, and as a bonus, you could save fees.

2. Don’t buy too many things

In the excitement of getting started with investing it can be tempting to invest in lots of different things, like a kid in a sweetshop you might want to buy everything.

You’ve probably heard about ‘diversifying’ your portfolio, which basically means making sure that you’ve got a spread of different investments. While diversifying is important it’s also key not to make too many investments at once.

First, it means that you’ve got way more work to do to keep track of all your investments, and second, it means that fees will start to eat away at your money.

Here’s an example of the fees problem. If you have £1,000 to invest and you buy 10 different funds, that will cost £15 in total (£1.50 per purchase). That means your funds need to all rise by 1.5% just to get back to your initial investment amount.

However, if you just invested your £1,000 in two funds it would cost £3 and means your fund only needs to grow by 0.3% to get back to your original sum. You can get some inspiration for funds by checking out the AJ Bell Favourite Funds list.

3. Make sure you buy enough

At the risk of sounding a bit like you can’t win, you also want to make sure you’re not putting all your eggs in one basket.

If you build up a decent amount in your investment account and invest all your money in one thing, you’re reliant on that fund or stock doing well. You might hit the jackpot, and it steadily rises, making you lots of money. But the risk with investing is that you could lose money too, and if that one investment falls in value a lot you could end up wiping out a big chunk of your money.

The aim is to get a decent spread across funds or stocks, but also across different investment areas. For example, you may not want all your money in just US companies or just technology companies, you want a sprinkling here and there.

Exactly how many funds you want to have and how many different areas you want to invest in depends on how much risk you want to take, so annoyingly there’s no one-size-fits-all number I can give you. But if you’ve thought about it and are comfortable with your spread of investments, you should be good.

One easy route to getting this spread of investments is to buy a multi-asset fund, which is one fund you purchase but that has investments in lots of different areas. There are lots of options for these, including the AJ Bell Funds.

4. Are you in the right account?

You will have set up your account and started investing but it’s good to double check your money is in the right place.

Most people will have picked an ISA for their first investments, which is more tax efficient than having it in a dealing account. If you picked a Dealing account you might want to reconsider whether an ISA is better for you, as you won’t pay any tax on your investment growth or income (whereas you might do in a Dealing account). The investments you can make are the same and the only big difference is that you can only put £20,000 a year into an ISA – but if this is your first foray into investing, I suspect that’s probably enough.

Another option is a Lifetime ISA. This could be a better account if you are saving for a first home, as the Government will add some unbeatable bonus money.

Your final option is a Self-invested personal pension (SIPP). Now, it’s likely that you might want to build up a savings pot in your ISA before getting a pension, particularly if you’re not yet on the housing ladder or have something specific you’re saving for. But it’s worth thinking about whether you can spare any money now to top up your pension pot. And remember, you can split your money across different types of accounts if you want to save for different things.

5. Have a plan

Much like you wouldn’t set out on a journey without popping your destination in Google Maps (or having an AA map printed out for old-school people), you will find your investing journey easier if you’ve got a plan. This doesn’t have to be pages of rules and calculations, but you just need to ask yourself a few questions to make sure you stay on track.

Here are a few things to get you started: Why are you investing? Do you have a timeframe or goal of a certain amount in mind? What kind of investments do you want to make? And how will you decide which investments to pick as your pot grows?