Start Your Investing Journey in 4 Easy Steps

Photo by Edward Howell on Unsplash

These days, investing is a super important way of saving money. At the time of writing, the Bank of England interest rate is at just 0.50%, while inflation is at 5.4%. That means that unless your money is generating at least a 5.4% return each year, it’s losing its value. Top savings accounts at the moment are promising a rate of return of less than 3%, so keeping your money in the bank will just mean you’re losing out in the long run.

However, by investing carefully, you’ll be able to generate higher rates of return than inflation, keeping your head above the water for as long as possible. Investing can be risky though, and I’m not a financial adviser. The following is based on my experience and what I would personally do if I was starting again from scratch, but please consult a qualified person and do your own research before engaging in any risky financial activity.

That being said, the below information will give you the knowledge you need to look into things further, and hopefully aid you in starting your own investing journey. I promise it’ll be worth it! I’ll first go over a few different trading platforms, and then a couple of trading strategies before giving you my overall guide to starting your investing journey!

📈 Trading Platforms

If you want to trade, you need somewhere to do it. If you’re not a professional investor working at a large firm, you’ll probably want to use a trading platform, or broker, to allow you to make your first investments. These days, most of these come in app form on your phone or laptop, and are really easy to set up. Some charge money for their use, but the three I’ll cover today are free to start using and charge little to no commission on trades, and so are great for beginners who just want to dip their toes in the investing waters.

The three main platforms for trading in the UK are Freetrade, Trading212 and eToro. (TL;DR: for new traders I recommend using Freetrade, which you can sign up to here. If you’re in the US, then I’d use Robinhood).

Freetrade is the easiest platform to use. It’s very beginner friendly, and has a Stocks and Shares ISA option for just £3 so that you don’t have to pay tax on investment returns (I recommend this if you already pay income tax or plan on investing enough money that your returns cover the costs). Remember that you can only open one Stocks and Shares ISA per year, so make sure you’re happy doing this.

It has a good choice of stocks including some popular index funds like the FTSE 100 and S&P 500, though some of the more niche stocks are only available to their premium users. You almost certainly won’t need this when you’re starting out, though.

Next up is Trading212. It’s slightly more complex than Freetrade and charges commission on overseas trades. However, T212 has social features to allow you to see what other people are investing in, and even allows you to copy other people’s portfolios if you want, though I don’t encourage doing this without your own research. On top of all this, the T212 ISA is free to open.

Of the three platforms, eToro is by far the most complicated. As well as stocks, it’ll allow you to trade cryptocurrencies, foreign currencies (Forex) and options (not recommended for beginners!). Much like T212, there are also lots of social features, though eToro really takes this to the next level. They have a feature called ‘copy trading’ that literally allows you to automatically copy trades make by top investors. Again though, I really don’t like this as you’re effectively giving up control of your money to someone else.

One of the biggest benefits of eToro is that it gives you direct access to US funds without having to buy a UK version of that fund (lots of funds need to be approved by the EU, and eToro goes straight to US brokers). This is great for investing in funds like the S&P 500 or the NASDAQ.

Overall, I recommend Freetrade if you’re a beginner investor, or eToro if you’re more intermediate-advanced and want more metrics and a few more choices for your investments.

You can sign up to the three platforms below:

• Freetrade
• Trading212
• eToro

Disclaimer: these are affiliate links and I may get rewards if you use them, but in the case of Freetrade, so will you! At the time of writing, Freetrade will give both you and I a free share worth £3-£200 once your account has been funded (even if it’s just £1!).

👛 Life Investing

One good strategy for new investors is investing for life, or what I like to call ‘enhanced savings’. This is essentially where you invest in large cap index funds like the S&P 500 (£GSPX on Freetrade) or FTSE 100 (£VUKG). These allow you to invest in large numbers of companies at once without having to spend lots of money. This way you’re not keeping all your eggs in one basket and the risk is spread a lot more.

These funds mostly follow the market and historically have grown at an average rate of about 7% per year, which is more than inflation.

There are also a few blue chip stocks that also grow very steadily and are reasonably low risk, like Apple ($AAPL) or Netflix ($NFLX), but there’s more risk involved here, so as with everything I’ve said so far, please make sure to do your own research first.

🍯 Dividend Investing

Dividend investing has become very popular in recent years, being at the heart of the FIRE (financial independence, retire early) movement. Essentially it’s where you invest in stocks that have a large dividend yield (aim for an average of 4% per year). A dividend is where a company rewards its investors with cash bonuses. This does impact the stock price, but if you’re looking to invest for a long time it can be a really great strategy as you receive straight cash into your brokerage account monthly or quarterly that you can then either withdraw or reinvest.

Stock prices can also still appreciate, meaning that when you choose to sell, you can make more than just the 4% you’ve made from your dividends. This is more risky than the enhanced savings route mentioned above, however, as you have to invest in more niche funds or, more likely, directly in individual companies.

Some popular dividend stocks are Johnson & Johnson ($JNJ) and AT&T ($T).

🌳 Growth Investing

Growth investing is by far the quickest way to make money on the stock market, but it’s also definitely the most risky and is the root cause of many people losing all their savings and getting nothing in return, so I would avoid this if I were a beginner trader.

However, I want to cover it for completeness so that you all know what options are available to you.

Growth investing is where you invest in stocks that you think will appreciate greatly in value over X amount of time. One classic example of this would be if you’d invested in Tesla ($TSLA) early-on and made millions.

This needs a lot of research and can go south really fast, so the higher returns aren’t always a good risk to take. I won’t be recommending any stocks here, as this is not a method I would recommend to beginners.

🛣️ Starting Your Investing Journey

Overall, if I was starting to invest from scratch, I’d take the following steps:

1. Sign up to Freetrade using this link and top up my account with some money (and claim my free share!).
2. Follow the ‘enhanced savings’ route and invest in large cap index funds, specifically the FTSE 100 and S&P 500.
3. Invest monthly, aiming for 10–30% of my salary if I can afford that, preferably into a Stocks and Shares ISA.
4. Once I’m comfortable investing, start researching dividend investing as an alternative form of investing to spread my risk, and start splitting the amount I invest between the two strategies.

I hope that this is useful to some people, but as I mentioned earlier, please speak to a professional before investing large sums of money.

If you have any questions about anything I’ve said here, please don’t hesitate to get in touch. You can email me at isaac@isaacharrisholt.com. I love chatting about money, so please start a conversation!

That’s all for now! See you in the next one 😁