You don’t need to be an expert (or wealthy) to start investing. It could be easier than you might think.
To help you, we look at:
- What is investing?
- How much do you need to start investing?
- What are the common ways to invest?
- Are there any fees or costs?
- How do you actually start investing?
- Takeaway investing tips for beginners
What is investing?
Investing is when you set money aside for the future and put it to work for you. When you invest, you’re buying into something you believe will increase in value over time.
Remember – there are no guarantees, which means you could get back less than you invest. Your money could potentially grow too, of course – that’s why people do it.
The key thing is to make sure you have some money saved up before you start investing. We recommend having an emergency fund to cover 3 to 6 months’ worth of living expenses.
An emergency fund can give you peace of mind that you’d have some money available for the unexpected, without needing to dip into your investment fund.
The value of investments can, and do, fluctuate – this is normal. Investing should be seen as a medium to long-term commitment, which means you should be prepared to invest for at least 5 years. This could give you a chance to ride out any short-term fluctuations. However, you can access the money if you need to.
How much do you need to start investing?
If you have a CAPITA Term Deposit, you can start investing.
Starting small could be a good way to dip your toe in the water. Then you can watch what happens to your investment – and invest more later if you want to.
What are the common ways to invest?
There’s no shortage of options for what you can invest in, but there’s also no need to be overwhelmed.
To help you get started, let’s focus on 2 common ways to invest:
- Shares
- Government bonds
- Mutual Funds
- What are shares?
When you buy shares, you’re effectively buying a small stake in a company.
Companies sell shares to raise money, which they then use to expand their business. Investors (known as shareholders) are then free to buy and sell some (or all) of those shares on the stock market at any time.
If the company performs well (or is expected to), demand for its shares will generally increase – pushing its share price up.
If the company does badly (or is expected to), its share price will generally drop. Interest rates and the wider economy can also have an impact on share prices.
As a shareholder, the value of your investment rises and falls with the share price. While the money you invest has the potential to grow, it could also fall in value, so you may get back less than you invest.
You have the ability to purchase shares that are local, regional and soon international.
- What is a fund?
When you invest in mutual funds, you’re buying a mix of investments, so you’re not putting all your eggs into one basket.
If some of the investments in the fund perform badly over a certain period, others may perform well. Helping to spread your risk is known as diversification.
There are many types of funds on offer, but an especially diverse option is a ready-made portfolio. This is a collection of investments, typically made up of shares, government bonds, property as well as other funds – often from different regions around the world.
CAPITA offers access to third-party funds, which are run by a professional fund manager who chooses which global investments to hold and monitors them on your behalf.
Are there any fees or costs?
If you choose to invest, any costs will be signposted by the investment provider in the relevant product documents before you apply. It’s important to read these carefully before you invest – and to factor the fees in, as they will impact your overall returns.
Common fees you may encounter include Trading or Transaction fees.
If you’re investing in shares, you normally pay a fee every time you buy or sell them.
Fees may also include an Account or Platform fee
There can also be a cost that a provider will charge to look after your funds or shares, giving you access to the tools and resources on their investment platform.
How do you actually start investing?
You can contact the Securities Brokerage team at CAPITA, who will provide you with a list of our onboarding forms.
Takeaway investing tips for beginners
- Save up an emergency fund of 3 to 6 months’ worth of living costs before you invest.
- Be prepared not to touch your investment for at least 5 years.
- Don’t assume you need to pick your own shares – ready-made portfolios are available.
- Use your income tax allowance when you invest to protect more of your money from tax.
- Consider starting small and watching to see what happens.