InvestingPersonal Finance

How To Invest Money: Three Key Considerations

Women holding pen and clipboard. Looking over investment graphs

If you want to have a chance of multiplying your money, eventually you’re going to have to look towards investment.

Traditionally favoured by richer folks as a way of boosting funds, recent developments such as the rise of bitcoin and the highly publicised GameStop investment story from the summer have led to a much wider interest.

This is a great thing. As long as you are only investing with money you can afford to lose – that means pay off your investment account and set aside an emergency fund first – investing is likely to far outstrip anything that a simple savings account could offer.

It’s also a lot simpler than you may have been led to believe. For non-experts, the easiest way to invest is through a managed investment account (such as a stocks & share ISA). These are offered by many banks, as well as investment platforms like Nutmeg and Moneybox. They let you buy into an existing portfolio, investing in companies that are chosen for you.

That said, there are still several things to consider before you get started…

Fees: how much does it cost to start investing?

There are several types of fee associated with making an investment. Assuming you go the route discussed above, of investing through a predetermined portfolio, the main cost will be the platform fee. This is a small percentage taken by the provider in exchange for holding your money and giving you access to their investment tools. When comparing different investment platforms, the difference in fees makes a good starting point.

It’s often a good idea to get advice before you make your investment, in which case you should expect to pay a fee for the information you receive. And for those who choose their own investments, there are additional costs associated with buying and selling shares.

Length of investment

It can sometimes seem like there’s conflicting information about investing. On the one hand, it’s touted as the best way to grow your bank balance, and on the other it’s said to be risky, with the danger of losing some of your existing money.

What this all comes down to is time. If you’re able to put your money away for several years (or even several decades), then it’s extremely likely that you’ll see it grow. For those who are expecting to use the money within the next few months or years, there’s a real risk that you could lose money. So think carefully about how long you’re willing to set your money aside for before jumping in.

Appetite for risk

We’re talking about relatively hands-off investment in this blog, but that doesn’t mean you don’t have any decisions to make. Investment platforms will typically have a range of starting options, depending on how much risk you’re willing to take. For instance, the Moneybox Stocks & Shares ISA gives the options of cautious, balanced or adventurous.

Adventurous portfolios give you the opportunity to make more money, but with bigger risk attached. They’re typically recommended to younger investors who have the time to ride out any bumps in the road. For those expecting to withdraw the money sooner, a cautious portfolio will be a safer bet. It’s worth noting that you typically have these options on your pension fund too, and should be able to change the allocation by logging in on your pension provider’s website.

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