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A beginner’s guide to investing

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Written by:
08/04/2013
Are you new to the world of investing or simply looking for a re-fresher? We go back to basics...
A beginner’s guide to investing

Why invest?

In theory, investment means you could earn a higher return on your money than if you just saved cash in a savings account. If you pick the right shares, funds or type of investment, the returns can be very high. However, investment means introducing risk to your money and there is the possibility you could lose some, or all, of your money.

What should I invest in?

There are all kinds of things or “assets” you can invest in from shares, equities, bonds and funds to property and art. You can diversify through investing in a portfolio of investments, including different markets, countries, companies and asset type.

Having a mix of different asset types will spread risk and mean you don’t have all your eggs in one basket.

Risk and reward

When you invest you will need to consider risk and reward. Generally, the greater the risk you take with your money, the greater the potential for growth.

Before investing you need to think about how comfortable you are with the potential loss. Ideally you should have cash for emergencies before you begin investing in anything else.

Monitoring and managing your investments

If you invest in a fund, the fund manager will send you an annual report on the fund’s performance. You’ll also be sent statements at regular intervals.

There are also various online services that allow you to take an active role in selecting funds and let you view, manage and monitor all your investments in once place.

A financial adviser can help you choose, monitor and review your investments

Dealing with problems

If you invest via a firm authorised by the Financial Services Authority (FSA), you get protection if you’re not happy with the service you’ve received.

FSA Authorised firms must have formal complaints procedures and belong to the Financial Ombudsman Service (FOS), which resolves disputes between a firm and its customers. It will also mean that if the firm goes bust you could be entitled to compensation from the Financial Services Compensation Scheme (FSCS).

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