First Time Investor Guide: 9 Steps to Get Started

Building up cash savings is a good habit. Building up investments may be better still. With investments, instead of your money being left as cash, it could be used to buy something. This something (your asset) could potentially, over the long-term, increase in value holding the prospect of far greater returns than savings.

It is simpler than you might think, and you don’t need to be a financial expert to be a successful investor. The hardest part can simply be to get started, so at Continuum we have compiled 9 steps to get your investment journey underway.

Step 1. Understand your goals

Before you invest a penny, decide what you are investing for. Income? Capital growth? What are your timescales? What is your wealth target?

Write down how much you can afford to invest, what kind of returns you would like to achieve and what kind of losses you could tolerate.

The answers are important, because they will shape how you will invest, and what you will invest in.

Step 2. Be honest about your attitude to risk

There are no guarantees with investing.  The greater the potential returns from a particular investment, the greater the potential risk.

If large losses could cause too much anxiety, investment might not be suitable for your personal circumstances. Cash savings, with guaranteed returns might be better for you.

Step 3. Spread the risk

You need to spread your money among a variety of investments.  Putting all your eggs in one basket, or one business may mean disaster if that business fails. Spread your holdings across several stocks, and ideally across several market sectors and even asset types.

This is known as diversification and is a key principle of successful investment.

Established investors may build a portfolio that is a mixture of assets such as stocks, bonds, cash and property. First time investors can get a similar diversified spread by investing in funds, which pool your money in a ready-made portfolio.

Step 4. Take the long view

The value of financial assets can fall without warning. Fortunately, markets almost invariably recover and rise further, but recovery can sometimes take years. 

Short term falls in the economy, individual businesses, and entire markets value are inevitable. If you cannot tie up the money you are thinking of investing for at least five years, it’s not suitable for you. Investing over several decades may be better.

Step 5. Get help with tax

Starting an investment can be simple, and tax efficient, for instance you can invest up to £20,000 a year in Individual Savings Accounts or ISAs with no income or capital gains tax while your money is growing or when you take it out.

With some investments you could find yourself with capital gains tax liabilities when you come to sell. Tax is complicated. Getting expert advice is essential.

Step 6. Understand the costs

It’s hard to invest without some costs. 

Fund management companies make an annual charge. The company you buy and hold your investments, which can be an online platform, fund shop or stockbroker will also charge when you make a transaction.

Cheapest might not be best.  You need to look at the service you get, but remember, every pound you pay in fees is a pound lost from your investments.  

Step 7. Choose your investment style

Will you be a hands-on investor, who monitors their portfolio obsessively, and watches for any sign that investments are not performing as you had hoped? If you own shares in individual companies, you should keep an ear out for any news, positive or otherwise.

Or would you prefer to be hands off, letting time and the markets do the work for you? It could be less stressful, especially if you invest through an established fund where you can trust a fund manager to do the worrying, monitoring and decision making for you. 

If you want to keep investing the really simple way is to buy a fund that simply tracks the stock market.

Step 8. Decide on your investment strategy

Developing a strategy that incorporates all the above points, and which outlines the type of assets you will have and the proportions of each that you will hold can help you stay in control of your investments. 

Avoiding fads, not following the herd, and staying invested even while the market rises and falls are all keys to successful investing – and all easier if you have a strategy to follow.

Step 9. Get expert help

Investment can be as simple or as complicated as you like, but it is always easier to get started if you have an expert by your side. At Continuum we can answer your questions about tax, risk and diversification, work with you to develop a strategy that’s appropriate for you, and help you find the funds or individual investments you want.

Think of us as your personal investment experts – and call us today.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

The value and returns of an investment are not guaranteed, investors may lose some or all of their investment. Capital is at risk.

The Financial Conduct Authority does not regulate taxation advice and deposit accounts.

Equity based investments do not afford the same capital security as deposit accounts. 

We recommend that you seek professional advice on personal taxation matters.

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