A Guide to Investing for Beginners UK – How to Start Investing in Stocks and Shares
The best platforms for investing for beginners UK include:
What Is Investing for Beginners?
Investing involves setting aside money for the future and putting it to work.
Investments can be made in:
Funds
Stocks
Shares
Bonds
Government bonds (gilts)
Property
The overall reason to invest is to generate profits in return.
Many investment systems revolve around the value of shares in companies. Buying shares makes you a ‘shareholder’ in the company.
When a company performs well, the value of its shares increases, leading to a rise in their prices. When a company is performing badly, the share prices fall.
Investors aim to sell their shares at a higher price than the purchase price, which creates a profit. They can also earn dividends from the companies they have invested in.
Along with traditional avenues, investments can also be made in alternative options such as cryptocurrency, futures and commodities.
By carefully selecting investment opportunities and monitoring market trends, investors seek to maximise their returns and potentially grow their initial investment into a larger sum.
However, it's important to note that investing always carries a degree of risk. Thorough research and an understanding of investment options is essential for making informed decisions.
Investing can act as a means of generating passive income, achieving financial goals and building a more secure future.
This article is a comprehensive beginner’s guide to investing in the UK.
What Are the Best Platforms for Investing in Stocks and Shares for UK Beginners?
The best platforms for trading stocks and shares for UK beginners are:
1. eToro
Pros
Social trading and copy trading features
Diverse range of investment options
Free to use and set up
Cons
Fee structure can impact overall profitability
Occasional platform stability issues
Limited access to certain markets and financial instruments
Fees: £0 per trade
Minimum deposit: £50
eToro is a popular social trading platform that offers a unique blend of social networking and investment opportunities.
It has innovative features and a user-friendly interface. This helps simplify the trading experience for both novice investors.
One unique feature is the ability to automatically copy the trades of successful traders. This allows users to benefit from more experienced traders.
eToro provides a wide range of investment options, including stocks, cryptocurrencies, commodities and more.
The platform's social aspect encourages users to engage with a community of traders, share insights and learn from each other.
51% of retail investor accounts lose money when trading CFDs with eToro. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
2. IG
Pros
Extensive range of markets and assets
Advanced trading tools and customisable charting
Educational resources and research materials
Cons
Higher fees, particularly for frequent traders
Inconsistent customer support
Platform can be overwhelming for beginners
Fees: From £3 per trade
Minimum deposit: £250
IG is a well-established online brokerage platform that offers a comprehensive suite of trading and investment services.
With its extensive range of markets, advanced trading tools and robust platform, IG caters to both beginner and experienced traders.
The platform provides access to various assets, including stocks, indices, commodities, forex and cryptocurrencies, allowing investors to diversify their portfolios.
IG's trading platform is known for its customisable charting tools and real-time market data. This gives traders the resources to analyse and execute trades effectively.
Additionally, IG offers educational resources and research materials, empowering traders to enhance their knowledge and make informed decisions.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of IG retail investor accounts lose money when trading spread bets and CFDs with IG. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
3. Interactive Brokers
Pros:
Advanced trading platform with powerful features
Extensive range of investment options across global markets
Competitive commissions and low margin rates
Cons:
Complex interface may be overwhelming for novice investors
Higher minimum deposit requirements compared to some other platforms
Response times for customer support may vary during peak periods
Fees: £3 per trade
Minimum deposit: No minimum
Interactive Brokers is a well-established and globally recognised online brokerage firm that caters to active and professional traders.
With its advanced trading platform, extensive product offerings and competitive pricing, Interactive Brokers appeals to experienced investors seeking access to global markets.
The platform provides a wide range of investment options, including stocks, options, futures, forex and bonds.
Interactive Brokers' trading platform is known for its powerful features, customisable interface and direct market access.
It provides traders with the tools to execute complex trading strategies.
The platform also offers comprehensive research tools, real-time market data and advanced charting capabilities to assist investors in making informed decisions.
Interactive Brokers' pricing structure is transparent, with competitive commissions and low margin rates.
4. Saxo Markets
Pros:
Wide range of financial instruments across multiple asset classes
Advanced trading tools and charting capabilities
Comprehensive research and analysis resources
Cons:
Customer support could be improved
Platform may be more suitable for experienced traders
Fees: £8 per trade
Minimum deposit: £0
Saxo Markets is a globally recognised online trading and investment platform. It offers a wide range of financial instruments and advanced trading features.
With its robust technology, comprehensive product offerings and competitive pricing, Saxo Markets appeals to both individual and institutional investors.
The platform provides access to various asset classes, including stocks, bonds, ETFs, forex, options and futures, enabling investors to diversify their portfolios.
Saxo Markets' trading platform is known for its powerful tools, intuitive interface and advanced charting capabilities, catering to the needs of experienced traders.
There are research and analysis resources, including market insights, economic data and expert commentary, empowering traders to make informed decisions.
5. Freetrade
Pros:
Commission-free trading
User-friendly interface
Diversified investment options
Cons:
Limited research tools
Premium subscription for advanced features
Currency conversion fees
Fees: £0 per trade
Minimum deposit: no minimum
Freetrade is a UK-based online investment platform that offers commission-free trading for stocks and exchange-traded funds (ETFs).
Freetrade aims to make investing accessible for beginners. It has a user-friendly interface and easy-to-navigate mobile app.
The platform provides a broad selection of stocks and ETFs. This helps build a diversified investment portfolio.
Freetrade offers both Basic and Plus account options. The Plus account provides additional features such as access to limit orders and ISAs for tax-efficient investing.
6. Hargreaves Lansdown
Pros:
Wide range of investment options and wealth management services
User-friendly online platform and mobile app
Extensive research tools, market insights and educational resources
Cons:
Higher fees compared to some other platforms
Additional charges for certain services
Availability limited to investors in the UK
Fees: £11.95 per trade
Minimum deposit: £1
Hargreaves Lansdown is a renowned investment platform and financial services provider in the UK.
With its comprehensive range of investment options and wealth management services, Hargreaves Lansdown caters to investors of all levels of expertise.
The platform offers access to a wide range of investment products, including stocks, bonds, funds and pensions.
Hargreaves Lansdown provides a user-friendly online platform and mobile app, making it easy to manage investments and track performance.
The platform also offers extensive research tools, market insights and educational resources to empower investors to make well-informed decisions.
7. Fineco
Pros:
All-in-one platform integrating banking and investment services
User-friendly interface and real-time market data
Competitive pricing with low trading commissions
Cons:
Limited access to markets outside of Europe
May not offer as extensive research tools compared to some other platforms
Availability may be limited to certain regions or countries
Fees: £2.95 per trade
Minimum deposit: No minimum
Fineco Bank is an Italian online banking and investment platform that offers a range of financial services, including trading, banking and investment products.
With its all-in-one platform, Fineco provides a comprehensive solution for investors looking to integrate banking and investment activities.
The platform offers access to various investment products, including stocks, bonds, ETFs, funds and options, allowing investors to diversify their portfolios.
Fineco's trading platform is known for its user-friendly interface, intuitive navigation and real-time market data, enabling investors to execute trades efficiently.
The platform also provides research tools, market analysis and educational resources to assist investors in making informed decisions.
Fineco offers competitive pricing with low trading commissions and transparent fee structures.
8. Barclays
Pros:
Wide range of investment products
User-friendly interface
Access to research tools and market analysis
Cons:
Fees and commissions may vary
Availability of features may depend on location or account type
Limited to the offerings and capabilities of Barclays as a financial institution
Fees: £6 per trade
Minimum deposit: No minimum
Barclays is a well-established and globally recognised financial institution. It provides a range of banking and investment services, including online trading and investment platforms.
Traders can access a variety of investment products, including stocks, bonds, funds and structured products, catering to the needs of different types of investors.
The platform provides users with a user-friendly interface, making it easy to navigate and execute trades.
Barclays offers research tools, market analysis and educational resources to help investors make informed decisions.
As a reputable financial institution, Barclays offers a level of trust and security to investors.
9. Interactive Investor
Pros:
Wide range of investment products
User-friendly platform interface
Competitive pricing with fixed monthly fee
Cons:
Additional charges for certain services or premium features
Occasional delays in customer support response times
Limited to investors in the UK
Fees: £5.99 per trade
Minimum deposit: No minimum
Interactive Investor is a leading online investment platform in the UK, offering a range of investment options and tools to help investors manage their portfolios.
With its comprehensive platform, Interactive Investor caters to both beginner and experienced investors.
It provides access to a wide range of investment products, including stocks, funds, investment trusts, ETFs and more.
The platform offers various account types, such as ISAs and SIPPs, providing tax-efficient investing options.
Interactive Investor's platform features a user-friendly interface, making it easy to navigate and execute trades.
It also provides research tools, investment news and educational resources to assist investors in making informed decisions.
10. Nutmeg
Pros:
Streamlined and user-friendly investment platform
Diversified investment portfolios aligned with investor preferences
Transparent fee structure based on investment amount
Cons:
Limited advanced trading features or research tools
Personalised advice may be more limited compared to traditional advisors
Limited to investors in the UK
Fees: £0 per trade
Minimum deposit: £500
Nutmeg is a prominent online investment management platform in the UK that offers a convenient and accessible way for individuals to invest their money.
As a robo-advisor, Nutmeg uses advanced algorithms and expert human oversight to create and manage diversified investment portfolios for its clients.
The platform is streamlined and user-friendly, making it easy for investors to set their investment goals, risk preferences and time horizons.
Nutmeg offers a range of investment options, including stocks, bonds, ETFs and socially responsible investments, allowing investors to align their portfolios with their values.
The platform also provides tools and educational resources to help users make informed investment decisions.
Nutmeg's fee structure is transparent, with a single, all-inclusive management fee based on the investment amount.
Definition of Investing and Its Purpose
Investing involves putting money into assets or ventures with the expectation of generating profits or income over the long term.
The primary purpose of investing is to grow wealth by making money work for you through capital appreciation, dividends, interest or rental income.
The Difference Between Investing in Shares and Buying Shares
Buying shares simply refers to the act of purchasing individual stocks or equity ownership in a company.
When you buy shares, you become a shareholder of that company, and you own a portion of its assets and earnings. Shareholders are entitled to certain rights, such as voting in corporate decisions and receiving dividends if the company pays them.
The primary goal of buying shares is to acquire ownership in a specific company with the expectation that the share price will increase over time, allowing you to sell the shares at a profit.
Investing in shares is a broader concept that encompasses various strategies and approaches for putting money into the stock market to achieve specific financial goals.
It involves not only buying individual shares but also diversifying your investment across different companies and sectors.
The objective of investing in shares is to generate long-term returns by holding a diversified portfolio of stocks. This approach allows investors to spread risk across multiple companies, reducing the impact of poor performance by any single stock.
What Can You Invest In?
Stocks – Investing in individual company stocks allows you to own a portion of the company and potentially benefit from its growth and profitability. Stocks can offer capital appreciation and may pay dividends to shareholders.
Bonds – Bonds are fixed-income securities issued by governments, municipalities, or corporations. When you invest in bonds, you are essentially lending money to the issuer in exchange for regular interest payments and the return of the principal at maturity.
Mutual Funds – Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. They are managed by professional fund managers, providing investors with a diversified and professionally managed investment.
Exchange-Traded Funds (ETFs) – ETFs are similar to mutual funds but trade on stock exchanges like individual stocks. They offer exposure to a basket of assets, making it easy for investors to diversify their investments.
Real Estate – Real estate investment involves buying properties for rental income or capital appreciation. Real estate can provide both a steady income stream and potential long-term appreciation.
Commodities – Investing in commodities involves buying and selling physical goods such as gold, silver, oil, or agricultural products. Commodities can serve as a hedge against inflation and geopolitical uncertainties.
Cryptocurrencies – Cryptocurrencies, like Bitcoin and Ethereum, are digital assets that use blockchain technology. Investing in cryptocurrencies can offer high potential returns but comes with higher risks due to their volatility.
Savings Accounts and Certificates of Deposit (CDs) – These are low-risk, interest-bearing accounts offered by banks, providing a safe place to store cash while earning a modest return.
Retirement Accounts – Retirement accounts like 401(k)s or Individual Retirement Accounts (IRAs) allow you to invest in a tax-efficient manner for retirement.
Peer-to-Peer Lending – Peer-to-peer lending platforms enable individuals to lend money to others and earn interest as lenders.
Startups and Private Equity – Investing in startups or private companies allows investors to potentially benefit from early-stage growth and expansion.
Art and Collectibles – Investing in art, rare collectibles, or precious metals can serve as alternative investments with potential for value appreciation.
What Are the Differences Between Short-Term and Long-Term Investments?
Short-term investments typically involve holding assets for a brief period, often less than a year, with the aim of capitalising on immediate price fluctuations.
Long-term investments are held for an extended period with the intention of benefiting from the power of compounding and capturing potential long-term growth.
The main differences between short-term and long-term investments lie in their time horizons, risk levels, potential returns and overall investment strategies.
Let's explore these differences in more detail:
1. Time Horizon
Short-term investments – Short-term investments typically have a time horizon of one year or less. These are intended for investors who need access to their funds in the near future or have specific financial goals to meet in the short term.
Long-term investments – Long-term investments are held for an extended period, generally more than one year and often many years. They are designed to help investors achieve long-term financial objectives, such as retirement savings or wealth accumulation.
2. Risk Level
Short-term investments – Generally, short-term investments are considered lower risk compared to long-term investments. They are often associated with more stable assets and lower volatility since the time horizon is shorter, allowing investors to avoid prolonged market fluctuations.
Long-term investments – Long-term investments tend to involve higher risk due to the longer time horizon. They are more exposed to market fluctuations, but over the long run, they may have the potential to yield higher returns.
3. Potential Returns
Short-term investments – Short-term investments usually offer lower returns compared to long-term investments. Their primary objective is preservation of capital and liquidity rather than aggressive growth.
Long-term investments – Long-term investments have the potential to generate higher returns over time, as they are exposed to the power of compounding and can benefit from market growth and economic expansion.
4. Investment Strategy
Short-term investments – Investors in short-term assets prioritize safety, liquidity, and flexibility. Common short-term investment options include money market funds, certificates of deposit (CDs), and short-term bonds.
Long-term investments – Long-term investors focus on growth and are willing to tolerate higher volatility in pursuit of potentially higher returns. They often invest in stocks, mutual funds, ETFs, real estate, and retirement accounts for long-term wealth accumulation.
5. Tax Implications
Short-term investments – In many countries, short-term investment gains are subject to higher tax rates compared to long-term gains. This can impact the after-tax return on short-term investments.
Long-term investments – Long-term capital gains are often subject to more favorable tax rates, encouraging investors to hold investments for longer periods.
6. Market Timing
Short-term investments – Investors in short-term assets may attempt to time market movements or interest rate fluctuations to optimize their returns within a limited time frame.
Long-term investments – Long-term investors typically adopt a buy-and-hold approach, focusing on the fundamentals of their investments and weathering short-term market fluctuations.
How to Get Started with Investing
Establish Investment Objectives
Begin by defining your financial objectives. This could include saving for retirement, buying a house, funding education, or building an emergency fund.
Consider the time frame for each goal. Short-term goals, such as a holiday or down payment, may require more conservative investments, while long-term goals, like retirement, allow for greater growth potential.
Investments come with varying levels of risk and understanding your tolerance helps determine the right asset allocation.
If you're willing to accept more risk for potential higher returns, you may have a higher risk tolerance.
Explore Different Investment Accounts
Explore retirement accounts, as these offer potential tax benefits and contributions grow tax-deferred or tax-free, depending on the account type.
Consider opening a brokerage account to invest in a wide range of assets. Brokerage accounts provide flexibility and accessibility for both short-term and long-term investment goals.
Selecting an Investment Strategy
Consider a passive investing approach, such as index investing or exchange-traded funds (ETFs).
These strategies aim to replicate the performance of a specific market index, providing broad market exposure at a relatively low cost.
If you prefer a hands-on approach, active investing involves researching and selecting individual stocks or actively managed funds.
Some investors opt for a combination of passive and active strategies. This allows for diversification through a broader market exposure.
Monitor and Make Adjustments
As you gain experience and knowledge, you can refine your investment strategy and make adjustments based on changes in your financial goals and market conditions.
Regularly review your portfolio to ensure it remains aligned with your objectives and make any necessary adjustments along the way.
Remember, investing is a long-term endeavour, and staying disciplined and patient is key to achieving your financial goals.
How to Invest in Stocks UK for Beginners
Stock investing in the UK involves buying shares of companies listed on the London Stock Exchange (LSE) or other UK stock markets.
By investing in stocks, you become a partial owner of the company and have the potential to benefit from its growth and profitability.
Before investing in stocks, it's important to assess the fundamentals and financial health of the companies you are considering.
Strategies for selecting and buying stocks include:
Fundamental analysis – This approach involves evaluating a company's intrinsic value by assessing its financials, industry position, competitive advantage, management team and growth prospects.
Sector-specific analysis – Analyse industry trends, economic conditions and regulatory factors that may impact the performance of companies within a particular sector.
Dividend investing – Dividend stocks are shares of companies that distribute a portion of their profits to shareholders as dividends. Evaluate a company's dividend history, payout ratio and dividend growth potential.
Growth investing – Growth stocks are shares of companies with strong growth potential. Look for companies with innovative products or services, expanding market share and robust earnings growth.
Value investing – Value stocks are shares of companies that appear undervalued based on their financial metrics. Look for stocks trading at a discount to their intrinsic value.
It's crucial to conduct thorough research, stay informed about the companies you invest in and diversify your portfolio to manage risk effectively.
Stay updated with UK market news, economic trends and regulatory developments. Regularly review your portfolio and seek professional advice if needed.
Investing in Bonds
Bonds offer a stable and income-focused investment option in the UK.
Investing in bonds involves purchasing fixed-income securities issued by entities like the UK government, local authorities and corporations.
Bond ratings and yields are important considerations when investing in bonds. Credit rating agencies assign ratings based on the issuer's creditworthiness.
Types of bonds and their risk profiles:
UK Government Bonds (gilts) – These are issued by the UK government to finance its spending. They are considered low-risk investments due to the government's creditworthiness.
Corporate Bonds – UK companies also issue bonds to raise capital. Corporate bonds have varying levels of risk depending on the creditworthiness of the issuer.
Local Authority Bonds – They are issued by local governments to finance public projects. Local authority bonds can provide stable income and are often considered lower risk.
UK Treasury Bonds (gilts) – These bonds are issued by the UK government and are considered the safest form of bond investment in the country.
When investing in UK bonds, it's essential to consider factors such as bond ratings, yields and the creditworthiness of the issuer.
Consider consulting with a financial advisor to enhance your understanding of bond investing in the UK.
Investing in Mutual Funds and ETFs
Investing in mutual funds and exchange-traded funds (ETFs) provides access to diversified investment portfolios managed by professionals.
Mutual funds and ETFs are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of stocks, bonds or other assets.
Mutual funds are actively managed, with fund managers making investment decisions.
ETFs are passively managed and aim to replicate the performance of an index.
It's important to consider the expense ratios and fees associated with these investments. Look for funds with lower expense ratios, as higher fees can erode returns over time.
Mutual funds and ETFs offer investors the benefit of diversification. By investing in a single fund, you gain exposure to a wide range of securities, which helps spread risk.
Diversification reduces the impact of any individual stock or bond on the overall performance of your investment.
It allows you to access different sectors, asset classes and geographic regions, providing potential for stable returns.
Read the fund's prospectus and consult with a financial advisor if needed to ensure the fund aligns with your investment objectives.
Key Considerations for Investing
There are lots of considerations when it comes to investing. These include:
Consider your personal financial situation and determine risk tolerance – Understand how much you can afford to invest and the level of risk you are comfortable with.
Invest only money that can be afford to be lost – Only invest funds that you can afford to lose without negatively impacting your financial stability.
Invest for the long term – It is advisable to have a long-term investment horizon to ride out market fluctuations and benefit from the potential growth of your investments over time.
Diversify your portfolio – Instead of investing in a single company or asset, spread your investments across different sectors, asset classes and geographic regions. Diversification helps mitigate the impact of any single investment's performance on your overall portfolio.
Regularly review your investments – Monitor the performance of your investments, assess any changes in the market or economic conditions and make adjustments as needed.
Undertake investor education and continuous learning – Educate yourself about various investment options, strategies and market trends. Continuously expand your knowledge through books, online resources and seek guidance from financial professionals.
What to Look for in a Share Trading Platform
There are numerous things investors need to look for when choosing the right share trading platform.
These include:
Fees – What are the fees to consider in addition to trading costs?
Minimum deposits – What is the minimum initial deposit?
Support for beginners – Is there a practice account you can use?
Analytics – Are the analytics and resources comprehensive?
Customer support – Can you access support easily?
Ease of use – Is the platform intuitive to use?
Frequently Asked Questions
How can I get into investing as a beginner in the UK?
Start by setting financial goals, understanding your risk tolerance and educating yourself about different investment options.
What is the best investment platform for trading stocks and shares for UK beginners?
The best investment platform for beginners in the UK can vary based on individual preferences. Popular options include eToro, Saxo and Degiro.
Which investing app is best for beginners?
Some popular investing apps for beginners in the UK include Degiro, Trading 212 and eToro.
How do I start investing in the UK with minimum capital?
You can start with low-cost investment platforms or apps that offer fractional shares, such as eToro, Saxo and Degiro, allowing you to invest with smaller amounts.
What is a simple way to understand the stock market for UK beginners?
A simple way to understand the stock market for UK beginners, is to start by learning the basics of stocks, bonds and funds. Then gradually delve into topics like company analysis, market trends and risk management.
What are some good stocks or best investments for beginners?
Good stocks for beginner investors in the UK can include well-established companies with strong track records, such as large-cap companies like BP, Vodafone or Unilever.
However, thorough research and analysis are essential before making any investment decisions.
What percentage of the UK population invests in stock markets?
The percentage of the UK population that invests in stock markets can vary, but according to recent estimates, it is around 10 to 20%.
How much do I need to invest to make £1,000 a month in the UK?
This varies depending on factors like the investment vehicle, returns and associated costs.
It is advisable to consult with a financial advisor to determine an appropriate investment strategy based on your financial situation.
Is online trading safe in the UK?
It can be safe if you choose reputable platforms regulated by authorities like the Financial Conduct Authority (FCA).
Take necessary security measures, such as using strong passwords and enabling two-factor authentication.
Why do most traders lose money?
Most traders lose money due to factors like lack of knowledge, poor risk management, emotional decision-making and market volatility.
It is important to have a well-defined strategy, risk management plan and continuous learning to improve trading outcomes.
What are the main things to consider before investing as a beginner?
It's crucial to consider factors like your financial goals, risk tolerance, time horizon and diversification.
Educating yourself about different investment options and understanding the potential risks involved is also important.
What are the most user-friendly investing platforms?
Some user-friendly investing platforms in the UK include eToro, Saxo and Degiro.
Are there free share trading platforms?
Yes, there are free share trading platforms available in the UK, such as eToro, Saxo and Degiro. These offer commission-free trading on selected stocks and ETF trading.
Final Thoughts
Investing for beginners in the UK is an exciting opportunity to build wealth and achieve financial goals.
Start by assessing your financial situation, setting clear goals and determining your risk tolerance.
Continuously educate yourself about the best investments for beginners as well as strategies to make informed decisions.
Diversify your portfolio across different assets and regularly review and adjust your investments.
Consider seeking professional advice when needed and remember that investing involves risk.