If you’re thinking about investing but aren’t sure where to start, you’re in the right place! I’m going to break down the basics of getting started in investing in the easiest way possible, so you can start seeing some real, profitable returns.
1. Start with a Stocks and Shares ISA
The first step in your investing journey is to open a Stocks and Shares ISA (Individual Savings Account). If you’re in the U.S., think of this as something similar to a Roth IRA.
A Stocks and Shares ISA is the perfect place to begin investing because it lets you invest up to £20,000 each tax year, and most importantly, you don’t pay capital gains tax on any profits you make. That’s a huge benefit!
For example, in my own Stocks and Shares ISA this year, I’ve made a return of just over 21% in the last year. There are various platforms to choose from, but the ones I personally use include Trading 212, Barclays Smart Investor, and AJ Bell. You can even have multiple ISAs, but I prefer to keep things simple and have most of my investments in one.
2. Invest in ETFs or Index Funds
Now, you might be wondering, What should I invest in? Here’s the good news: You don’t have to pick individual stocks and obsess over which company will do well or fail. Instead, I suggest starting with Exchange Traded Funds (ETFs) or Index Funds.
ETFs track specific markets, which means you can invest in a basket of companies with just one purchase. For example, the S&P 500 ETF gives you exposure to the top 500 companies in the U.S. And the best part? Over the last 100 years, the S&P 500 has averaged a return of over 10% per year! (Though, of course, past performance isn’t a guarantee of future results.)
If you’re looking for global diversity, you could invest in something like the FTSE All-World ETF, which gives you access to thousands of companies around the world. You can also focus on specific sectors that interest you, like technology, through ETFs such as the iShares S&P 500 Information Technology Sector ETF.
3. Keep Costs Low
One of the best things about ETFs is that they are passively managed, meaning they don’t require an active fund manager to make decisions for you. As a result, the fees are much lower than actively managed funds or mutual funds, which is great for long-term investors. Lower fees mean your money grows faster!
4. Diversify Your Portfolio
One of the biggest benefits of ETFs is that they provide diversification. Rather than putting all your money into one stock, you’re spreading your investments across many companies, which lowers the overall risk in your portfolio.
As a beginner, I suggest investing mostly in ETFs. Individual stocks can be exciting, but they come with a lot of research and risk. If you do want to try investing in individual stocks, maybe allocate 5-10% of your portfolio to them, but let the majority of your investments be in ETFs to keep things simple and reduce risk.
5. Think Long-Term and Automate Your Investments
Investing is not about short-term gains. The real power of investing comes with time and compound interest. I always suggest setting up a direct debit to make regular contributions to your investment account. This way, you don’t have to think about it, and you can take advantage of dollar-cost averaging (or pound-cost averaging in the UK), where you invest the same amount every month, regardless of the market conditions.
This strategy helps you ride out market fluctuations without stressing over every peak and trough. Over time, your contributions will compound, and you’ll start to see your money grow!
6. Celebrate Your Progress
Lastly, I encourage you to celebrate your wins—no matter how small. Investing for the long term takes discipline, and each contribution is an investment in your future. Take a moment to appreciate the beauty of compound interest and watch your portfolio grow over time. Even a small amount invested regularly can lead to substantial gains in the long run.
Investing doesn’t have to be complicated or overwhelming. Start small, invest regularly, and let time do the heavy lifting. Always remember to do your own research and be prepared for market ups and downs—but most importantly, get started!
Happy investing!
Your Money Mindset 