The decision to invest is a matter of personal preference.
Some swear by it and point to decades of data that investing in the stock market is the best way to make long-term inflation-beating profits; Others are dead against and argue that they will not gamble their money, pointing to three massive stock market crashes since 2000 for evidence.
And for many, there is a middle ground, where they put a portion of their wealth into an FSCS-protected but inflation-threatening cash savings account and invest the rest.
I say, to each his own, but once someone has decided to invest – ideally in a tax-beating shelter of an Isa – what is the fastest and simplest way to do it?
It is possible to invest around the world to grow your wealth at a low cost and from the comfort of your home, our guide explains how
There is a vicious circle in writing a guide for this. You need to keep it short to get people’s attention, but often each element you explain mentions something else that needs further explanation.
As I’ve already wasted too many words in that preface, I’ve challenged myself to explain the basics that one needs to know in order to be as invested in Isa as possible from here on out – and Then added some simple fund options. Down.
how to invest
You should not risk your rainy day funds or the money you need in the short term. Keep it safe in easily accessible cash savings.
But you don’t even need to be rich to invest, you can start investing with a small lump sum or £25 per month.
You can pay a professional to do it for you but for most people the cost of a financial advisor will feel prohibitive for their simple investment needs.
This leaves two main options: use an automated service or do it yourself.
The former involves an online money manager, or robo-advisor, as they are often called. These provide the tools to establish your goals and risk levels and will build a portfolio that they manage for you.
You pay a little bit for it, but what you get in return becomes easier to invest with the help of some expert. Read our review of the top robo-advisors here.
If you want to choose investing yourself – perhaps with some guidance – then you need a DIY investment platform. My tried and tested, established platforms that are easy to use include Hargreaves Lansdowne, Interactive InvestingR, AJ Bell And fidelity to truth.
They let you buy shares, funds and investment trusts, and our DIY investment platform round-up will help you understand their charges and what’s best for you. Pawn The low-cost platform is also worth noting, but only lets you buy its products, while free trade Offers duty free share dealing but you cannot buy funds.
what to invest
Once you have crossed the ‘how’ hurdle, the next step is which investment to choose.
Even if you forgo individual share-picking and opt for funds or investment trusts that pool investors’ money for a selection of companies, there is a staggering array to choose from.
In my years writing about investing, I’ve learned that most people are concerned not with finding the absolute best investment, but about choosing a bad investment. And I think that’s why many people fall for this point.
Don’t stop here though, it’s not difficult.
The key is to think as broad and simple as possible by investing around the world – and understanding a little bit about asset allocation. It sounds complicated, but it’s about not simply putting all your eggs in one basket.
At the simplest level, there are two main investment assets: shares and bonds — both can be purchased in well-diversified funds and trusts.
Stocks are considered riskier but offer higher rewards, whereas bonds are safer but offer less profit opportunities.
Shares involve buying a stake in a company, which can go up or down in value, while bonds involve lending money to the government or company for an interest rate return and all your money back.
The safest bonds are considered to be top grade government bonds in your home currency. Fortunately for British investors, UK government bonds, known as gilts, make the cut here.
The traditional way to take less risk has been to have a higher proportion of bonds: so a bold portfolio might be 100 percent stocks, a middle of the road 60 percent stocks and 40 percent bonds, and low risk might be a 20 percent stock and more. 80 percent bond.
Easy Isa Investing
1. Do you have the rainy day fund in cash and is it sufficient?
2. Check what you can invest in and be happy with the risk (play with the risk tools of some sites)
3. Search ‘how’. Decide whether you want robo-advice or DIY and choose a platform
4. Choose a broad global fund and balance it in a bond or cash ratio to reduce your risk
5. Get started and invest regularly
6. Check up once or twice a year: Think long term but make sure the investment is still right for you
The problem at the moment is that bonds pay very low interest and are historically expensive to buy, because of very low interest rates and central banks buy them collectively – first to combat the financial crisis and then the COVID-19 lockdown. for.
If you want to keep things really simple, you can replace the bonds with cash in a savings account.
Keep it separate from your rainy day pot and think of it as part of your investment portfolio, with a ratio of cash to cash relative to how much risk you’re willing to take.
There is an alternative to creating active funds, where a manager tries to cherry-pick the best investments and beat the market, or the often-cheap passive funds that follow a stock market index.
If you want to go active, choose a fund or investment trust that isn’t too expensive and has a manager you think will add value but not a lot of risk.
If you choose a passive tracker fund, aim to keep costs low.
Whichever path you take, the easiest thing to start with is the global…