In today’s fast-paced world, we often hear about the importance of investing, but getting started can feel overwhelming for many people.
The thought of putting your hard-earned money into something you may not fully understand can be daunting.
However, investing can be an excellent way to secure your financial future and even grow your wealth.
In this blog, we will break down the process of getting started with investing today, so you can feel more confident and better equipped to embark on your financial journey.
Investing Made Accessible: The Rise of Online Platforms
With the advent of technology and the digital age, investing has become more accessible than ever before.
Online platforms such as Wealthify have simplified the process by providing user-friendly interfaces and straightforward, jargon-free guidance.
These platforms often offer lower fees and minimum investment amounts compared to traditional financial advisors, making it easier for those with limited funds to enter the market.
To begin, create an account with your chosen platform and deposit your initial investment.
This could be as little as £25 depending on the platform’s requirements.
By starting with a small monthly investment, you can slowly build your portfolio and gain confidence in your investing abilities.
As you become more comfortable, you can consider increasing your monthly contributions or diversifying your investments.
Understanding Investment Types: Stocks, Bonds, and Funds
Before diving into the world of investing, it’s essential to familiarize yourself with the different types of investments available.
The three primary investment types are stocks, bonds, and funds.
Stocks: When you invest in stocks, you are buying shares of ownership in a company. The value of these shares can fluctuate based on the company’s performance and market conditions. Stocks generally have the potential for higher returns but also carry a higher level of risk compared to bonds.
Bonds: Bonds are essentially loans made to a company or government in exchange for regular interest payments. The principal amount is typically returned to the investor upon the bond’s maturity. Bonds are generally considered to be lower-risk investments compared to stocks, but they also tend to offer lower returns.
Funds: Funds pool together money from multiple investors to buy a diversified portfolio of stocks, bonds, or other assets. By investing in a fund, you gain exposure to a broad range of investments without having to manage them individually. Funds can be actively managed by a professional fund manager or passively managed through index-tracking investments, such as Exchange Traded Funds (ETFs) or tracker funds.
Establishing Your Investment Goals and Risk Tolerance
Before making any investment decisions, it’s crucial to determine your financial goals and risk tolerance.
Your investment goals should be specific, measurable, and attainable.
For example, if you’re investing for retirement, consider how much money you’ll need, the timeframe you have to achieve that goal, and the level of risk you’re willing to take on.
Risk tolerance refers to the amount of volatility or fluctuations in value you’re willing to accept in your investments.
Generally, higher-risk investments have the potential for higher returns, but they also come with a greater likelihood of losses.
Your risk tolerance will depend on factors such as your age, financial situation, and investment horizon.
A financial advisor or an online risk assessment tool can help you determine your risk tolerance and suggest appropriate investments.