If you’re like me and a bit clueless about finances, then here is a really helpful post for beginners that are thinking about investing but don’t know where to start. As a graduate, I want to make sure my money is growing and not just sat in my bank waiting to be spent, but I don’t really know how to go about that. So I wanted to find some investing tips to share with anyone else in my position.
Ola runs All Things Money (@allthingsmoney_) on Instagram, an account dedicated to the things we weren’t taught at school about money. I asked Ola if she could help me out with a post as all of her information on Instagram is so useful.
So, here are some pointers for anyone that wants to start investing but isn’t sure how to go about it:
What is investing?
Investing is where you aim to purchase stocks and shares and sell them for a profit. In some cases, investing can be a good alternative to putting your money into a savings account. Rather than allowing your money to sit in a bank account to earn interest, you can invest in the stock market where your money can make a profit on your original investment. Despite the potential to earn a profit, there is an element of risk that must be considered when investing. This is because there is the potential to lose the money you have invested!
Why should we invest?
As we are living in a low-interest economy right now, many savings account are offering either very little or no returns on the money we have currently sitting in our savings accounts. This is not what we like to hear! Rather than leaving our money to accumulate pennies, an investment in the stock market can be a good alternative option! Interest rates are currently set at 0.1% whereas according to Nerdwallet, the historical average stock market return is 10%! See why the option to invest can seem quite appealing?
Investing top tips
When investing, there is the potential to gain some huge returns, however, before you do consider to invest in the stock market, I do have a few top tips:
- Your first port of call should be to open up a Stocks and Shares ISA. This means that any profit you do make, will be tax free!
- Consider how much money you can afford to invest. It is VITAL that you have cash savings set aside before you consider investing. The last thing we want is for you to lose all of your hard earned cash!
- Make sure you do your research! Do not go into this blindly. You need to make sure you have conducted thorough research into the stock or share you want to invest in. Lack of research can increase your chances of losing more money than ever intended.
- Start with a small amount first. This will allow you to learn how investing really works. Make sure you only invest money that you don’t mind potentially losing. Even with a few pounds to spare, your money still has the potential to grow with compound interest.
- Try to invest for a minimum of five years. If this is not possible then it may best to just stick to your savings account!
- Try to diversify your portfolio as much as possible! You can do this by investing in an ETF such as the FTSE 250 or the S&P 500. You can also diversify by investing in a range of different companies or industries. Diversification can help lower your potential risk!
- Start as soon as you can! Doing so will enable you to invest for a longer period of time allowing you the potential to gain some great returns.
Hopefully, this article is a helpful insight into how investing works and why young people like us should consider doing it! The need to invest right now can seem very appealing due to the current climate, however, just make sure you conduct thorough research first and are aware of the risks involved when investing in the stock market!
If anyone has any further questions about investing or anything finance related, go and check Ola out on Instagram at All Things Money!
Or if you’re struggling to budget, including day to day money and renting as a graduate, check out my other posts on finance here.