Investing money for beginners

For some people, figuring out how to start investing your money is hard. For others, figuring out what investing actually is can be even harder.

Even though there’s no such thing as stupid questions (most of the time) we don’t always feel confident enough to ask them. That’s why we’ve asked Wisers building our new Assets product to answer some of our customers' money investment questions to get them out of their Google search black hole.

That being said, when it comes to investing your personal money, you should always do your own research too. Investing your own money comes with risk as well as potential, so if research doesn’t cut it, you can always ask a professional.

What you’ll read below are some of the top questions we’ve received from our community, answered by our top people. Take it with a pinch of salt, it’s only guidance, not financial advice.

Here we go...

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Investing money for beginners. What are investments and how does it work?

Imagine a plant in your garden. You bury the seed, water it, and overtime, with enough care, that leaf poking out from the soil turns into something to brag about at your next Summer BBQ. That’s pretty much how investments work.

You put some of your money into buying things like stocks, bonds and funds and overtime, their value may increase, allowing you to sell them off for more money than you initially paid in. Ah, the circle of finance life.

Cool, but where do I even start?

Watch Wolf of Wall Street. Just kidding.

The answer to this question depends on what you’re saving for and for how long. Are you saving for a house? Is a pension the goal? Have a think about what’s important to you. Take risk levels into consideration when investing.

You also need to think about risk levels and how comfortable you are with these risks. The riskier investments can get you better returns on your money, but they could also expose you to higher losses. More steady investments might have lower returns but you’re less likely to suffer big losses.

Step back and set clear goals.

How do I maintain consistency with my investments?

You’ve set your goals and you know the level of risk you’re willing to take. Now it’s time to watch your investment plant grow (as we mentioned above, we can’t guarantee it will grow, this year's harvest could be off or you could be using the wrong soil. Ok we’re done with the plant chat now, promise).

Just like saving, by investing frequently you can potentially make the most on the returns you get while ironing out the impact of market volatility (big price swings). A good way of starting to do this is by using Google “dollar cost averaging”.

You could try taking a percentage of every paycheck you get and investing a fraction of it into your chosen asset(s) each month. Consistency is key. Why? Because compounding returns are really important.

When investing money to make money, bear in mind that all investments are subject to volatility (some more than others) so it’s important to keep in mind your goals and time horizon when deciding if it’s time to take your money out of the market.

As an individual, is it possible for me to invest in the stock market?

To put it simply, yes.

This is becoming easier and easier for the individual. Traditionally it’s been expensive and inaccessible, but like most things in the world of finances, that’s changing.

There are now lots of providers out there that are easy-to-use and allow you to invest as little as £1 with a few taps on your phone.

When you invest in the stock market you get to choose between buying shares in individual companies or investing in equity mutual funds/ETFs.

What a fund consists of will depend on its objective and risk appetite. For example, tracker funds are designed to track an index like the FTSE 100 so would have shares in the UK’s biggest companies.

This is where your goals come in. This will determine how long you invest in something for and what level of risk you’re willing to take. Most funds will have a risk score and tell you their investment objectives.

Do your research and figure out what works for you.

Should I pay for advice on investing? I don’t want to make bad decisions with my savings.

Again, this depends on your personal financial situation, goals, risk appetite among others. You don't necessarily need an advisor as there are many online resources available now, both paid and free, which could help in the decision making process. Also, a professional independent advisor is a good choice if you're seeking tailored investment advice or you are unsure about investing.

Luckily, there are plenty of online resources out there, both paid and free, that can help you come to a decision. But, a professional independent advisor is a great idea if you're after tailored investment advice or you’re feeling unsure.

What type of investment matches my lifestyle?
There are two sides to this coin (excuse the pun we couldn’t help ourselves).

One on side, you want to consider your risk appetite and investment time period. On the other hand, you want to consider investing in things you care about.

When it comes to timing, think about when you’ll need that coin back in your wallet and how prepared you are to risk losses for potential larger gains.

Investing in something you care about is easier than ever with all the options available to you.

You can buy shares in individual companies that represent a cause you care about. But, if you prefer a fund, you can still look for ones in specific sectors such as renewable energy.

Once you’ve found a potential fund, take a look at the fact sheet or prospectus they provide. This will tell. You have everything you need to know from the investment objectives to the fund manager and top shares in the fund.

I’d like to know about sustainable investing and how green is it really?

ESG stands for Environmental, Social, and Governance — and the label is used to mean "good investing". But, it’s not that simple.

As with many other areas, ‘good’ investing is a spectrum. Your personal beliefs may be not to invest in oil companies. But others may think "oil companies aren't going anywhere, so we should only invest in the greenest oil company".

I don’t really understand how to use your new Assets feature. Can you tell me more?

We sure can.

Our new Assets feature is international money that you can hold in different asset classes, while being able to continue spending and sending money as normal.

When you switch a balance to stocks, instead of holding it as cash, your balance is held as units in the iShares World Equity Index Fund that’s managed by Blackrock. The fund tracks the MSCI World Index made up of 1,500 global companies including Apple, Google, and Tesla.

When you opt to switch your balance to be backed by assets, in the background Wise invest all the money in your balance. This means they send the cash to the fund and you own as many units as it can buy.

It also, as much as possible, retains its cash-like behaviour. So you can spend from your balance, etc.

It’s paid for by subtracting an amount from your balance that’s proportional to the amount held in the balance over the previous month, and this amount is small compared to movements in the market.

You can read more about it here.