Always remember that investments can go down as well as up in value, so you could get back less than you put in. A rule of thumb is to hang on to your investments for at least five years to give them the best chance of providing the returns you want.
At Koody, we divide investment platforms into three categories based on the type of service and level of support or guidance they offer. The three categories are:
Robo advisors are technology companies that provide automated financial planning with little or no human supervision. Their products include ready-made investments, managed investments and financial advice.
Robo advisors are excellent for beginner investors or those who want to avoid the complexities associated with selecting individual stocks, shares, and other investments.
Please remember that when you invest, your capital is at risk. ISA, pension, and tax rules also apply.
Here are the best robo advisors for beginners in the UK:
Moneybox is a UK investment app that allows you to invest in a range of tracker funds, exchange-traded funds (ETFs), exchange-traded commodities (ETCs) and US stocks. Moneybox offers two forms of investing depending on your investing savviness, investing strategy and attitude to risk. Beginner investors or those who prefer a ready-made portfolio can choose from the three ready-made portfolios on offer - Cautious (lower risk), Balanced (medium risk) and Adventurous (higher risk). Advanced or more confident investors can pick from the range of tracker funds, ETFs, ETCs and US stocks available and build their portfolios themselves.
The Moneybox app also empowers you to invest your spare change by rounding up your card transactions to the nearest pound and investing the difference on your behalf. For example, if you spend £2.30 on a snack, Moneybox will invest 70p for you. You can also instruct the app to make weekly or one-off deposits into your investment portfolio as it rounds up your spare change.
You can start investing with Moneybox with as little as £1. Moneybox offers commission-free trading on US stocks. However, fund management fees apply to other types of investments ranging from 0.12% to 0.61% per annum. A currency conversion fee of 0.45% also applies to US stocks. Moneybox’s suite of products includes a Stocks and Shares ISA, Lifetime ISA, Junior ISA, Personal Pension, and General Investment Account.
Capital at risk.
Moneyfarm is a UK robo advisor that provides you with a personalised investment plan based on your risk preferences and goals. With Moneyfarm, you can invest in one of seven risk-rated portfolios recommended to you based on the result of an online assessment. Each portfolio comprises a mix of cost-efficient exchange-traded funds (ETFs) and other passive index trackers. Moneyfarm also offers ethical or ESG investment options for those who want to invest in line with their values.
Moneyfarm’s customers benefit from free and personalised digital financial advice from Moneyfarm’s investment consultants, and you can chat, phone, email, or meet your consultant in person. To get started, you will be asked to complete a short survey so that Moneyfarm can better understand how you approach your finances before matching you to your investment portfolio and consultant.
You can start investing with Moneyfarm with as little as £500. Moneyfarm charges an annual management fee depending on how you choose to invest, ranging from 0.75% to 0.35% on the total value of your portfolio. An annual fund management fee of 0.20% (average) also applies to all portfolios. This is built into the cost of the ETF or tracker fund on any given day, so you will not see fund charges being deducted from your portfolio directly. Moneyfarm’s suite of products includes a Stocks and Shares ISA, Junior ISA, General Investment Account, and Personal Pension.
Capital at risk.
Wealthify is a UK robo advisor that allows you to choose from five investment plans based on your attitude to risk. These investment plans are named Cautious, Tentative, Confident, Ambitious and Adventurous and allow you to choose a risk level that best suits your needs. If you are conscious about the environment or would simply like to invest in line with your values, Wealthify’s five portfolios are also available as ethical investment plans, so you can stay true to your values while potentially growing your money.
With Wealthify, the minimum investment is £1, and you can withdraw your money anytime. There is an annual platform fee of 0.60%, and fund management fees range from 0.16% to 0.70% per year, depending on your chosen investment theme. Once you complete the signup process, you can start investing with a lump sum of £1, which you can top up as frequently as you want.
Wealthify’s suite of products includes a General Investment Account, Stocks and Shares ISA, Junior ISA and SIPP in both Original and Ethical themes.
Capital at risk.
Trading apps allow you to buy, sell and hold investments such as shares, bonds, funds, ETFs, crypto and CFDs. Unlike robo advisors, they do not provide financial advice or any form of guidance. Their services are aimed at people who are happy making their own investment decisions.
Please remember that when you trade, your capital is at risk. ISA, pension, and tax rules also apply.
Here are the best trading apps for beginners in the UK:
Freetrade, widely recognised as one of the best stock trading apps in the UK, is a mobile trading app that gives you access to thousands of UK and overseas stocks, ETFs, REITs, and investment trusts covering different sectors and markets worldwide. The Freetrade app can be accessed on iOS, Android and desktop devices and offers a slick and easy-to-use user interface and experience. The app is a great choice for both beginners and experienced investors.
With Freetrade, you can invest in fractional shares of even the most expensive US shares with as little as £2. Depositing, trading and withdrawing on Freetrade are commission-free (other charges may apply). FX rates apply to US stocks at the spot rate + 0.45%. To get the most out of Freetrade, you can choose from three subscription plans. The Basic Plan costs £0.00 per month and allows you to open a General Investment Account (GIA) and trade commission-free. The Standard Plan costs £4.99 per month and allows you to open a Stocks and Shares ISA in addition to your GIA. With the Plus Plan at £9.99 a month, you get a Self-Invested Personal Pension (SIPP) and a Stocks and Shares ISA in addition to your GIA. Dealing on Freetrade is commission-free irrespective of the subscription plan you choose. Freetrade’s suite of products includes a Stocks and Shares ISA, General Investment Account (GIA) and SIPP.
Promo: Get a free share worth £10 when you join Freetrade and fund your account with at least £50.
Please note: When you invest, your capital is at risk. The value of your investments can go down as well as up, and you may get back less than you invest. ISA rules apply. SIPP eligibility and tax rules apply. Free share terms and conditions apply.
Interactive Investor, commonly hailed as one of the best online trading platforms in the UK, is a subsidiary of wealth management giant Abrdn and the second-largest investment platform in the country. Also well known for its fixed monthly subscription fees (as opposed to annual percentage-based fees like most other investment platforms), Interactive Investor has been providing investment services and financial information to UK customers since 1995.
If you choose to invest with Interactive Investor, you will gain access to over 40,000 investment options, including UK and overseas shares, funds, investment trusts, and ETFs. This is the second-widest choice of UK and international investments offered by an investment platform in the UK. Interactive Investor allows you to build your portfolio in multiple ways depending on your investment goals, attitude to risk and personal preferences. Beginner investors or those who prefer ready-made investments can build their portfolios using Interactive Investor’s Quick-Start Funds, an easy way to start investing where you choose from six low-cost funds prepared by the team of experts at Interactive Investor. Advanced or more confident investors can choose from a wide range of funds and shares and build their portfolios themselves. Interactive Investor gives you access to 17 global stock exchanges, including exchanges in North America, Europe and Asia Pacific. These include markets such as the FTSE 100, FTSE 250, FTSE All-Share, S&P 500, NASDAQ, NYSE, Dow Jones and more. In addition to the above, Interactive Investor offers Japanese, Indian and Chinese shares in the form of American Depositary Receipts (ADRs).
Interactive Investor gives you a free trade every month, which you can use to buy or sell any investment. After that, trades usually cost £5.99. It also offers a free regular investing service that allows you to deposit as little as £25 a month towards your investments without paying a trading fee each time. For those investing £30,000 or less, Interactive Investor offers a cheaper plan called Investor Essentials that costs just £4.99 a month. This plan does not come with the monthly free trade. Interactive Investor also has lots of expert ideas, research and insights, which can be helpful when choosing investments. Interactive Investor’s services include a Trading Account, Stocks and Shares ISA, SIPP and Junior ISA.
Capital at risk.
Plum is a UK money management and investment app that helps you manage your money and build an investment portfolio. With Plum, you can invest in up to 21 funds and over 3,000 UK and overseas stocks. Plum also offers ethical or ESG investment options for those who want to invest in line with their values.
The Plum app empowers you to invest your spare change by rounding up your card transactions to the nearest pound and investing the difference on your behalf. For example, if you spend £1.20 on a snack, Plum will invest 80p for you. The app also calculates how much you can afford to set aside and invests it automatically once a week.
You can start investing with Plum with as little as £1. Plum charges a monthly subscription fee ranging from £2.99 to £9.99 per month; you get the first month free. Stock trading on Plum is commission-free (other charges may apply). FX rates also apply to US stocks at the spot rate + 0.45%. The average annual fund management fee across all funds offered is 0.39%. Plum’s suite of products includes a Stocks and Shares ISA, General Investment Account and Personal Pension.
Capital at risk.
An investment platform, otherwise known as a fund supermarket, allows investors to buy, sell and hold a range of investments in one place, including shares, funds, bonds, commodities, property, CFDs and more.
You can think of them as a combination of robo advisors, trading apps and much more. They are quite powerful, and you can buy and sell almost any type of investment with them.
Please remember that when you invest, your capital is at risk. ISA, pension, and tax rules also apply.
Here are the best investment platforms for beginners in the UK:
eToro is highly regarded as one of the best investment platforms in the UK, catering to a diverse range of investors, from beginners to experienced traders. The platform enables users to invest in and trade various assets, including stocks, ETFs, indices, commodities, forex, cryptocurrencies, and NFTs, directly or through contracts for difference (CFDs).
If you are new to investing or prefer a more hands-off approach, eToro offers over 40 fully allocated, balanced investment portfolios that focus on different market segments you can understand and to which you can relate. Some of the portfolios include MetaverseLife, BigTech, GoldWorldWide, Vaccine-Med, BitcoinWorldWide, Diabetes-Med, Driverless, GigEconomy, and many more. These portfolios are a grouping of several assets, such as stocks, cryptocurrencies, ETFs, and even people, bundled together based on a predetermined theme or strategy.
It is entirely free to open an account with eToro, and all registered users receive a US$100,000 demo account for free, which you can use to practise trading or investing until you become confident. Trading on eToro occurs in USD, so a currency conversion fee will apply if you deposit or withdraw a currency other than USD. Withdrawals incur a fee of US$5 (£4), and the minimum withdrawal amount is US$50 (£40). For UK customers, eToro offers an eToro Money app which allows you to convert your GBP to USD free of charge, thereby reducing your foreign exchange costs. eToro does not offer an ISA or SIPP.
Please note: Your capital is at risk. 80 - 90% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Additionally, cryptoassets are highly volatile and unregulated in the UK. No consumer protection. Tax on profits may apply. Copy Trading does not amount to investment advice. Other fees apply. For more information, visit eToro.
InvestEngine is a low-cost ETF investment platform that provides a choice of managed portfolios tailored to you and commission-free DIY investing to help you build long-term wealth. Users can invest in over 500 exchange-traded funds (ETFs) from leading global asset managers.
With InvestEngine, you can invest in two ways depending on your tolerance for risk and savviness as an investor: beginner investors or those who prefer a ready-made investment portfolio can select from one of the Managed Portfolios on offer, where the team of experts at InvestEngine will take care of the day-to-day investment decisions for you. These portfolios are a selection of ETFs based on your preferences and risk tolerance. Once you’ve selected one, you do not have to do anything else besides monitor the performance of your investments. Advanced or more confident investors can choose from 500+ commission-free ETFs and build their portfolios themselves. InvestEngine also offers fractional investing, which allows you to buy bits and pieces of an ETF with as little as £1. This enhances your ability to build a diversified portfolio even if you have a small amount of money to invest. With the DIY Portfolio, there are no platform fees. All InvestEngine portfolios are free of setup fees, dealing fees, ISA fees or withdrawal fees.
InvestEngine stands out amongst its competitors as one of the cheapest investment apps in the UK because it charges no platform or management fees on its DIY Portfolio and just 0.25% a year on its Managed Portfolio. You can also start investing with as little as £100. InvestEngine’s suite of products includes a Stocks and Shares ISA, Personal Account and Business Account.
Capital at risk.
AJ Bell is one of the UK’s largest online investment platforms, and its mission is to make investing as easy as possible for anyone. The platform offers thousands of investment options for the DIY investor, including shares, funds, bonds, investment trusts, ETFs, ETCs, and warrants, making it one of the best investment platforms in the UK.
There are multiple ways to get started with AJ Bell, depending on your risk tolerance and investing savviness. Beginner investors or those who prefer to choose a ready-made investment portfolio can get a little, or a lot, of help from AJ Bell’s specialists by selecting one of the investment ideas on offer. Investment ideas are diversified ready-made baskets of investments that you can select based on your personal preference and attitude to risk. There are eight total investment ideas, each built by a specialist team, and you can pick the right one for you depending on whether you are seeking to simply grow your money over time or receive an income whilst still growing your money. Expert investors can take advantage of the stock and fund screeners and complex instruments available on AJ Bell and build their portfolios themselves.
AJ Bell charges an annual platform fee ranging from 0.25% to 0% depending on the size of your portfolio. Dealing fees for buying and selling investments online are £1.50 for funds and £9.95 for shares (reducing to £4.95 if there were 10 or more online share deals in the previous month). AJ Bell’s products include a Share Dealing Account, Stocks and Shares ISA, Junior Stocks and Shares ISA, Lifetime ISA, SIPP and Junior SIPP.
Capital at risk.
Vanguard is a low-cost investment platform with over 75 own-brand funds, including ETFs, active funds and index funds. Vanguard does not offer stocks and shares, but there are various ETFs on offer for those interested in exchange-traded securities.
The Vanguard Stocks and Shares ISA allows you to build an investment portfolio in two ways depending on your investing savviness: beginner investors or those who prefer a ready-made investment portfolio can build their portfolio by selecting one of Vanguard’s ready-made portfolios, which give you access to thousands of bonds and shares in a single investment. Advanced or more confident investors can choose from over 75 individual Vanguard funds and ETFs and build their portfolios themselves.
To open a Vanguard Stocks and Shares ISA, you need at least £100 per month or a lump sum of £500. There is a yearly management fee of 0.15% (capped at £375) per year. Some of the funds on offer have separate charges, so please check these before investing. Vanguard’s suite of products includes a Stocks and Shares ISA, Junior ISA, General Account and SIPP.
Capital at risk.
Investing is a way of setting money aside with the expectation that your money will grow in value over time. When you invest, you are essentially putting your money towards assets in the hope that they will appreciate in the future.
As the value of your assets appreciates, you make positive returns on your investments and generate some income along the way. In the same way, the value of your assets could fall, and you could lose some or all of the money you invested.
We all have financial goals. For some, it might be saving towards long-term goals such as living comfortably in retirement. For others, it might be saving towards significant life events such as buying a home or getting married.
Whatever the goal, investing in stocks and shares can be a great way to grow your money and can offer you higher long-term returns than leaving your money in a savings or current account.
According to a 2019 Barclays Equity and Gilt survey, shares do better than cash nine times out of ten in any ten-year period. This reduces to seven times out of ten when investing for just five years.
People often ask how much money can be made in the stock market. On average, the value of your investment could rise by about 3 - 12% a year depending on a number of factors, but there are no guarantees.
The success or failure of your investment portfolio will usually depend on several factors, including:
Apart from the value of your investments appreciating, you can also earn regular income from some of the companies you invest in when they make a profit. This income is called a dividend. A dividend is your share of a company’s profit.
As you progress in your investment journey, you will come across the phrase, “Past performance is not a reliable indicator of future results”. This is usually to let you know that sometimes your investments can fail and that no human or algorithm can predict how your investments will perform. A company’s past performance cannot guarantee its future success, so the onus is on you to do your own research before investing in the stock market.
The stock market is a marketplace where shares and other assets are bought and sold. There are several stock markets around the world, and in the UK, the main exchange is the London Stock Exchange (LSE).
The LSE offers trading in shares from big names you’ll have heard of, such as Vodafone on its main market, to smaller companies, such as ASOS listed on the Alternative Investment Market (AIM), its junior market. Anyone can buy shares on the London Stock Exchange, but you need to go through a stockbroker.
When you start investing in the stock market, you’ll come across market indices. In the UK, the main indices are the FTSE 100 (an index of the 100 largest companies on the LSE), the FTSE 250 (an index of the next 250 largest companies) and the FTSE All-Share (an index of all the shares listed on the LSE’s main market).
A market index is simply a group of shares of companies representing a particular segment. These companies are usually grouped by size and value.
Indices are used as benchmarks to gauge the movement and performance of market segments. For example, the FTSE 250 can be used to gauge the fortunes of the UK economy.
Beginners can invest in a variety of assets in the stock market. The major types of assets are stocks and shares, funds, bonds, commodities and property.
Before you start investing, it is important to separate the money you want to invest with from your emergency fund and everyday spending pot.
Your emergency fund should be equal to at least three times your monthly living expenses. This will prevent you from dipping into your investments if you find yourself in any form of major financial crisis like a job loss or severe health problem. Try to keep your emergency fund in a high-yield, easily accessible cash savings account like a cash ISA or a standard easy-access savings account.
You also want to have an everyday spending pot so that you do not feel the urge to cash out your investments every time you need to buy groceries or hang out with friends.
More importantly, it is crucial to consider your wider financial position before investing in the stock market. This might include paying off outstanding debts, such as a credit card bill or personal loan. Suppose you have £4,000 outstanding on a credit card charging interest at 19%. It will cost you £760 a year to pay back the debt. Your investments are unlikely to match this return, so it might be wise to pay off the credit card debt and other expensive debts before investing.
Once your finances are in order, you can invest as much or as little as you feel comfortable with. Most investment platforms and robo advisors will allow you to start investing with as little as £25 a month, and some even accept £1 a month. Investing small amounts regularly is known as “drip-feeding” into your investment pot, and it can sometimes be better than investing a huge lump sum once.
To invest in stocks in the UK, you need to decide what you want to invest in (e.g. shares, bonds, funds, ETFs, commodities, etc.), pick an investment platform, stockbroker or financial adviser, and choose a tax wrapper.
Here is a breakdown of how to start investing in the stock market and a handy video on how to invest in funds (ETFs specifically) with InvestEngine:
It is also worth mentioning that if you do not want to use a tax wrapper, perhaps because you have already used up your ISA allowance for the tax year, you can choose to invest in a general investment account (GIA).
With the GIA, you are allowed to make up to £12,300 of gains tax-free. Additionally, the first £2,000 you receive in dividends is tax-free. Read our Stocks and Shares ISA guide for more information.
Here’s a video on how to invest in funds (ETFs specifically) with InvestEngine:
We’ve outlined some typical investment fees below, focusing only on the fees charged by fund providers. Share-dealing platforms charge pretty similarly, so there is no need to worry about that for now. If you are curious, here is a list of stock trading fees.
Pro Tip: Fixed fees tend to work out cheaper for people investing high amounts, whereas percentage-based fees tend to be less expensive for those with little to invest.
Here is a breakdown of the typical investment fees:
Here are our top ten tips for investing in the stock market:
Here are the best investment platforms for beginners in the UK:
No, you cannot lose more money than you invest in the stock market.
In the UK, there are protections for retail investors, which means you cannot lose more than you have invested, even when trading on margin. However, it is possible to lose everything you’ve invested.
If you are not trading on margin, the only time you really lose money in the stock market is when you are forced to sell your investments in bad years. However, if you can hold on to your investments even when the market takes a hit, things should improve in the following years, but there are no guarantees.
You may also lose money if you choose to invest in only one company and that company fails. Investing in just one company is the riskiest thing you could do in the stock market. Ideally, you should invest in a wide range of companies operating in different sectors across different geographies. Creating a diversified investment portfolio like this can be tricky; that’s why most investors, even the most experienced ones, use funds when investing.
Yes, you can make a lot of money from investing in stocks, but you can lose a lot of money too. Always remember that the stock market is not a place to create wealth. It is a place to grow your wealth.
The best way to create wealth is to build a company or get hired by an existing company. Depending on your circumstances, the business you build may create wealth for you passively or actively. As an employee, you create wealth actively by going to work and earning a wage.
The second-best way to create wealth is to cut your costs. It is the gap between your income and expenses that creates wealth. We cannot stress this enough. Do not let society pressure you into spending unnecessarily. If you need to track your expenses to understand your spending better, use our free budget app, Budget by Koody.
The third-best way to create wealth is to improve your skills. One of our favourite quotes is by best-selling author Hal Elrod. He wrote, “Your level of success will seldom exceed your level of personal development because success is something you attract by the person you become.”
It is when you have created wealth that you may invest and grow your wealth in the stock market. Wealth can be anything from £1 to £1 billion or more, depending on your circumstances. Today, many investment platforms will allow you to start investing with as little as £25 per month. Some even accept £1 per month.
There are many ways to research what to invest in. We recommend the following websites for company news, research and commentary: Motley Fool, ADVFN, Hargreaves Lansdown, Interactive Investor, CNBC, The FT and Reuters. Additionally, have a look at this Spot the Dog guide by Bestinvest - it shows underperforming funds that you probably want to avoid.
As a beginner investing for the first time, you can invest as much or as little as you feel comfortable with. Most investment platforms and robo advisors will allow you to start investing with as little as £25 a month, and some even accept £1 a month.
Here are some of the best ways to invest with little money:
Beginner investors with little money can start by investing for the long term in low-cost global or total-market index funds and ETFs. An index fund is a broad portfolio of stocks or bonds in publicly listed companies that tracks the performance of a market index, whereas an ETF is an investment fund that trades on a stock exchange like an individual stock.
Both index funds and ETFs offer significant diversification benefits and have very low fees ranging from 0.05% to 1.00% of the total value of your investment portfolio.
There have been many instances of prominent investors, including Warren Buffet, advising everyday investors to buy index funds and ETFs instead of picking individual stocks and trying to time the market. Some of these seasoned investors have even gone as far as saying, “The single best choice for a lifelong holding is a total stock-market index fund.”
Investing in passive index tracker funds and ETFs is one of the best ways to start investing in the UK, and the best investment platforms for beginners will offer a wide range of index funds and ETFs.
Here, you can view the five-year performance of some of the best index funds and ETFs in the UK.
The best investments for beginners in the UK are:
The best way to invest money in the UK is to implement a low-cost passive investing strategy, which focuses on simplicity, cost-effectiveness, and diversification while taking advantage of tax-efficient investment accounts such as ISAs and pensions. For example, you may buy one or two low-cost index funds or ETFs and store them in a Stocks and Shares ISA or Private Pension.
This strategy is ideal for young investors who want to build wealth over time without the hassle of constantly monitoring and managing their investments. A key aspect of this strategy is to maximise the use of tax wrappers, such as Individual Savings Accounts (ISAs) and pensions, which provide significant tax advantages for long-term investors and help maximise your investments.
ISAs, for example, offer tax-free growth on investments held within them, allowing you to avoid paying taxes on capital gains and dividends. Pensions, on the other hand, offer tax relief on contributions, which means that your money grows tax-free until you start withdrawing it in retirement. Utilising these tax wrappers in conjunction with a passive investing strategy can help you to maximise your investment returns and achieve your financial goals more effectively.
For more information on how to invest, check out these investing books.
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