Always wanted to invest but not sure where to start? Here’s what I did to kick start my investment journey…
Step 1 – What did I invest in?
When I started to learn about money planning and investing, I learned about the relative risk of different investing options. Have you heard of an investment pyramid? Here’s mine.
My base is in diversified investments through index trackers. Have you heard of an investment tracker often called an ETF?
Exchange-traded funds, or ETFs are a basket of various stocks or other types of investments. They’re a great option for diversification since you’re not putting all your hard-earned cash—in one basket. ETFs usually track an index, like the FTSE 100, so they give you a good snapshot of how a sector or market is doing. They are also typically low in fees so you keep more of your investment compounding.
When I started out I set up regular amounts going into an investment ISA through index tracker funds. I had a mix of trackers to cover the UK Ftse 100, UK Ftse 250 the US S&P500. If I was starting out again today I’d start with a global index tracker that tracks the world market and means your money is diversified across the world. In Trading 212 there’s one called the Vanguard Ftse All world or in Hargreaves Lansdown L&G Global 100 Index Trust C Acc. To start with I didn’t understand everything about the trackers just that they were tracking an index, they were accumulator (Acc) so that means any returns are reinvested to keep the growth compounding and that they typically had costs of less than 1%.
There are other ways to start investing such as through direct shares and you may feel comfortable and understand that but I found trackers a diversified and simple way to get in the market.
Step 2 – what platform to use?
When I started out there were less platforms around than there are today. I signed up with Hargreaves Lansdown and I’ve found it really user friendly. I particularly like that I can link my husband and my children’s accounts to mine so I can easily track everything. Hargreaves Lansdown are slightly more expensive than some of the newer platforms like Trading 212 or Webull. Trading 212 and Webull offer referral programmes from time to time where if you use someone’s link or you share your link with someone who signs up you can get free shares – always a nice boost for your investments!
Step 3 – what instrument did I hold my investments in?
In the UK there are 3 main instruments to hold your investments in.
An investment ISA – we currently have a £20k per year allowance where we can invest tax free in the ISA so all your growth and returns are free of tax.
A SIPP – this is a self invested pension plan and there are tax reliefs available for anything invested in a SIPP but then withdrawals once you reach the eligible age are taxed.
A discretionary investment account – this is where you invest through a standard account without any tax relief when you pay in or when you withdraw. Any returns in here would be likely subject to capital gains tax.
I hold my investments in my ISA and SIPP. I pay into my workplace pension but I also have property income and I find it beneficial to invest my profit from property into my SIPP to reduce my taxes and keep more of my money working for me and my future.
I hope this has been useful please let me know if you have any questions.