Where Do You Start When It Comes to Investing?

Starting your investment journey can seem daunting, but taking the first step is often the hardest part. Here’s a simple, step-by-step guide to help you get started with investing, from understanding your motivations to monitoring your progress and making adjustments.

Getting going (Typically with an ISA)

The most important step (and often the hardest!) is the getting going. One of the most common ways to begin investing in the UK is through a Stocks and Shares Individual Savings Account (ISA). An ISA can offer tax advantages, making it a popular choice for new investors who are UK residents. Check that your budget is aligned, build up your emergency fund and carry out relevant research before leaping in is a great way to get all your ducks in a line to getting going with investing. 

What’s Your Investing ‘Why’?

Understanding why you want to invest is crucial. Are you saving for retirement, a home, your children’s education, or simply to grow your wealth? Knowing your “investing why” will help keep you motivated and focused, especially when the market gets turbulent.

Set Your Goals

Once you know your “why,” set specific, measurable goals. For example, if you’re saving for retirement, determine how much you need to save and by when. Break down your goals into short-term, medium-term, and long-term objectives. This will provide a clear roadmap for your investment journey.

Understand Your Risk Tolerance

Your risk tolerance is your ability and willingness to lose some or all of your original investment in exchange for greater potential returns. If you don’t know your risk tolerance, consider looking at a risk calculator, which we have on our platform. Your age, financial situation, and comfort level with market fluctuations will help determine whether you should take a conservative, moderate, or aggressive approach to investing. Remember, with all investing there is the possibility of losing the amount that you put in. Your capital is at risk.

Build a Plan and an Investment Strategy

Having a solid investment plan or strategy is essential. Here’s how to build one:

1. Diversify: Spreading your investments across different asset classes, such as stocks, bonds, and real estate helps to reduce risk.
2. Asset Allocation: Decide how much of your portfolio to allocate to each asset class based on your risk tolerance and goals.
3. Regular Contributions: If you set up automatic contributions to invest consistently over time, the  risk can be balanced out.

Until you have a detailed plan, starting with a simple, diversified portfolio such as a balanced mutual fund (a big basket of different assets with a moderate risk profile) or a target-date fund (which automatically adjusts its risk for a specific retirement age goal) is often considered a strong start. These can provide broad exposure to different asset classes and adjust their risk level as you approach your goal.

Monitor Your Investments

Regularly monitoring your investments is key to ensuring they remain aligned with your goals as well as reviewing your portfolio to check its performance and make sure it’s on track is key to success. Look at factors like:

1. Performance vs. Benchmarks: Compare your portfolio’s returns against relevant benchmarks to see if it’s performing well, bearing in mind that just because performance has been positive in the past, does not mean it will always remain so in the future. 
2. Asset Allocation: Ensure your investments remain diversified and aligned with your risk tolerance.

When to Make Changes

You’ll need to adjust your portfolio based on changes in your life or financial situation. Significant life events that might prompt a review and potential changes include:

1. Career Changes: A new job, promotion, or job loss can impact your income and investment strategy.
2. Family Changes: Marriage, divorce, the birth of a child, or children going to college can affect your financial goals.
3. Market Changes: Significant market movements may require you to rebalance your portfolio to maintain your desired asset allocation.

Scheduling reviews and adjustments will help ensure your investments continue to align with your long-term objectives.

Conclusion

Starting your investment journey doesn’t have to be complicated. By taking the first steps — securing your budget, bulding your emergency fund and researching your investing, before exploring a tax-efficient platform like an ISA—you can overcome initial barriers and begin building your wealth. Understand your motivations, set clear goals, assess your risk tolerance, and build a diversified investment plan. Regularly monitor your progress and make adjustments as needed, especially in response to life changes. With a thoughtful approach, you can confidently navigate the world of investing and work towards achieving your financial goals.