A Beginner's Guide to Investing
The ‘I’ word really isn’t as scary as it sounds, and you don’t have to be an expert in finances to do it!
Financial investing is something anyone can do at any age... to invest is simply to put money into something such as property, financial schemes or shares with the aim to achieve a profit in the future.
Still bamboozled? Here’s a beginner’s guide to help you take those first steps into the world of investing...
Investing your money into something always holds a risk; you’re ultimately gambling with the hope of coming out with more money than you put in. The most popular forms of investing include anything from stocks and shares, property and bonds, to startups, artwork and old cars. Shares (also known as equities) are small fractions of a company, so if you own a share in a company you technically own a tiny percentage of that company’s value. So, if the company grows and gains value, your share (investment) will be worth more than what you bought it for when you decide to sell.
The most obvious reason people invest is the hope that in return they’ll increase their finances. For example, when you invest money into a vintage car, as long as you take care of it the value should increase, and therefore if you decide to sell it on in the future you’ll get more money back than what you originally paid for it. A type of long-form investment, such as a pension, follows the same principle; you put money into your pension pot over a long period of time, and when you finally receive your pension you’ll get more money out of it due to it being tax free and employees adding a percentage into the pot too. Places like the People’s Pension is an auto-enrolment scheme where your money is invested and then available once you reach retirement age.
To invest in shares the minimum age in the UK is 18, but there are other ways younger people can invest. A popular option is putting money into a tax-free ISA. Often, junior ISAs will have to be opened by a parent or guardian but will offer a higher interest rate compared to ISAs for 18+. Anyone at any age can micro-invest, where you save small amounts of money regularly (and it won’t impact your everyday financial situation). This is an investment approach that is manageable, and you can start by simply popping £2 in your piggy bank every week. As long as you don’t spend it, you’ll see your money grow.
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Written by Robert Bester - Content Writer
Published on 10th July 2020