AD- This is a paid post in collaboration with Wealthify.
Capital at risk.
If you’re new to the idea of investing, it might feel like there are a lot of unknowns and you’ll probably have a lot of questions. How do you get started? Where should you invest? How much can you invest? Unless we have a parent, friend or partner who is already investing themselves, it can be really hard to know where to get the information that is right for us. It’s often up to us to do all the decoding for ourselves to figure out the best path to take.
But fear not, you’re reading an article that is going to break things down for you, and make investing easier to understand. The jargon around investing can be overwhelming, but you won’t find too much of that here. This beginner’s guide to investing has been created with you in mind.
Let’s dive in!
Why should you consider investing?
A really big reason why you should consider investing is that you work too hard not to! Investing means that your existing money, is (hopefully) going to generate more money. Essentially, it means your money will work harder, so that you don’t have to.
If your money sits in a traditional savings account, the interest you receive on your savings may not beat inflation rates. Every time the interest rates on your savings account fall below the rate of inflation, the value of your savings will decrease, meaning your money won’t stretch as far when you finally come to spend it. Based on historical performance, investing could provide you with inflation-beating returns. Take the annualised returns of the FTSE 100, one of the main UK stock markets. Since 1983, the FTSE 100 has returned about 6.2% a year (with re-invested dividends) – this sits well above 3.4%, the average inflation rate (RPI).
When you invest, you are looking after ‘future you,’ and giving your money a chance to grow.
The earlier you start investing, the sooner your money could benefit from market movements and the power of compounding. Compounding is when you earn profits (interests and dividends) on top of your profits.
For example, if you invested £100 a month for 10 years in a medium risk Plan, you’d contribute a total of £12,000. At the end of the 10 years, your pot could be worth £14,043. If you did the same over 20 years, you’d contribute £24,000. However, your total at the end of the 20 years could be £34,425! Please remember that these are only forecasts and with investing there’s a risk you could end up with less than you initially put in.
How can you get started?
To get started with investing, you’ll need to choose a trusted provider, and open an account with them. Wealthify are a particularly great option due to their credentials. They are fully backed by Aviva, have a 4.6 Trustpilot score (as of February 2021), and also won the award for Best Investments Provider at the British Bank Awards 2020.
Next, decide what kind of account you’d like to open
This is where you might need to do some research on the best option for you. Two popular types of investment accounts are a Stocks & Shares ISA, and a General Investment Account.
If you open a Stocks & Shares ISA, you can invest up to £20,000 a year, and the returns you make on that money are tax free. A General Investment Account (GIA) is a great option if you’ve used your annual ISA allowance – the returns you make on that money are subject to tax.
Decide how much you’d like to invest each month
Next, you’ll need to decide how much money you’d like to invest. With Wealthify you can invest as little as £1 and you can make monthly contributions if you want to! It’s easy to increase or decrease the amount that you invest if you have a change in circumstances.
Identify your investment style & theme
Choosing your investment style is essentially choosing your risk level. Your investment style is down to your personal choice, and luckily, Wealthify ask you a few questions to ensure that the risk you have chosen aligns with your current financial situation. The questions range from how much your salary is, to how much money you have saved.
Next, you can choose your investment theme- either ‘Original’- Wealthify’s classic blend of investments from the UK and overseas, or ‘Ethical,’ a blend of environmentally and socially responsible investments.
Wealthify will then reconfirm the fees that you’ll pay- Wealthify charge a simple annual fee of 0.6%, plus you’ll pay other investment costs ranging between approximately 0.16- 0.56%.
Then, you’ll be taken to a screen to see where your money is invested and how much money has been put in certain areas- it’s all displayed in clear, simple pie charts.
You’re all set up! Now, if you want to make things a bit easier, you could set up a Direct Debit and make regular contributions to a Stocks & Shares ISA or a General Investment Account– the whole process will be automatic. You don’t have to give it a second thought. Simple right?
You can manage your Wealthify account through the dedicated app, which is very straightforward to use. Through your online dashboard, you can check what’s in your Plan and how your investments are performing, at any time, anywhere. If you’re holding your investments for the long term (ideally 5 years or more), you can check up on your investments from time to time, but remember that the market goes up and down.
And if you’d like to learn even more about investing with Wealthify? Head over to their blogs to find out more.
1: Data from Bloomberg
2: Data from ONS
3: This is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £11,709. If markets perform better, your return could be £16,785. Values correct as of 17/02/2021
4: This is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £26,420. If markets perform better, your return could be £45,233. Values correct as of 17/02/2021
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Past performance is not a reliable indicator of future results.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.