Investing in the stock market: 10 tips to get you started
1) Open a dealing account – these are offered by the major fund platforms such as Hargreaves Lansdown, TD Direct Investing, Alliance Trust or Fidelity Personal Investing, and also stockbrokers such as Killik & Co. All should have lots of choice, lots of investment options and plenty of tips for new investors.
2) Decide how much you want to invest – most platforms allow you to invest anything from £50 a month. If you have a larger lump sum investment to invest, it can be worth staggering when you invest to ensure that you aren’t just buying at one point.
3) Decide what you would like your investment to do – this sounds obvious in that many would simply like their investment to go up. However, the reality is a bit more nuanced. You might want an income for your investments, you might not want to see significant fluctuations in capital value, you might be investing for a short or long time. All of this will affect the investment you choose.
4) Use the online tools – The majority of platforms have tools to help you choose the right investment or give you a range of options. They will ask you questions such as your age, your attitude to risk and whether you have money saved elsewhere to lead you to the best choice.
5) Start with collective investments – many investors start by trying to identify a tiny company that will make them 100x their money. The odds are against you. Novice investors are probably better off starting with a collective fund, such as a unit or investment trust, where a fund manager pools the assets of lots of investors to invest in a diverse range of companies.
6) Look at the best-buy lists – most of the platforms and stockbrokers have ‘best buy’ lists, lists of funds, chosen by their in-house investment professionals, covering a range of different areas and investor needs.
7) Don’t forget tax – Wrapping your investments in an ISA shelters them from both income and capital gains tax. While interest rates remain low, it may be better to use your ISA allowance for stock market investment rather than to hold cash as the tax savings are potentially far greater.
8) Do your research – there is plenty of information online about different type of funds as well as expert opinion.
9) Listen to the right people – the ‘right’ people are those with a clear track record of making money in stock markets. They are probably not those who shout loudest about having a sure-fire investment tip. Just remember, past performance is not an indicator of future returns.
10) Don’t be afraid to ask – Stock market investment is not as complicated as it seems, but plenty of people have a vested interest in making it seem difficult by using jargon. Ask questions where you don’t understand, and if you still don’t understand, steer clear. Check out the YourMoney.com glossary for an essential guide to all the important words, abbreviations and phrases from the world of investing.