💰 Investing Your First £100: A Beginner's Guide to Growing Your Wealth
As inflation continues to make everyday items more expensive in the UK, it's more important than ever to grow any savings that you have through investing. Protecting your money from the eroding impact of double-digit inflation is crucial, especially with the cost of living crisis not looking like it's going to get better anytime soon.
As someone who has worked in the finance space for over 10 years, I've become familiar with the different methods available to people who want to invest their cash and grow their wealth. However, before I had this work experience, I didn't have a clue about what, when, or how to invest. School didn't teach it, and neither did my university. So, even though I was keen to grow any savings that I had through investing, the fear of stepping out into the unknown stopped me from doing it altogether.
The most annoying thing about not investing was not missing out on the stock market's surge in growth, but it was that once I actually went through the process of investing my money, I realized that it isn't a complex process and it doesn't require large amounts to get started. In fact, you can make your first investment with just £100 and 20 minutes of your time. Once you've done it, you'll see how straightforward the process is and how quickly it can be done.
To help ensure that you don't follow the same path of failing to invest like I did, seeing your savings dwindle in purchasing power as inflation continues to play havoc, I'm going to walk you through the process to follow to invest your first £100. By doing that, I'm hoping that you'll see just how easy it actually is, which will encourage you to continue investing the same amount on a monthly basis, giving you the benefit of the power of compounding and allowing you to grow your savings much more quickly than if they were just sitting in a low-paying bank account.
Table of Contents
1. Introduction
2. Why Invest?
3. Assessing Your Financial Situation
4. Understanding the Risks of Investing
5. Choosing a Platform
6. Setting Up Your Account
7. Choosing Your Investments
8. Investing in ETFs
9. Investing in Individual Stocks
10. Making Your First Investment
11. Monitoring Your Investments
12. Conclusion
Why Invest?
Investing is a way to grow your wealth over time. By investing your money, you're putting it to work for you, allowing it to earn more money through interest, dividends, and capital gains. Over time, this can add up to a significant amount of money, especially if you start investing early and continue to do so on a regular basis.
Investing is also a way to protect your money from inflation. Inflation is the rate at which the general level of prices for goods and services is rising, and it erodes the purchasing power of your money over time. By investing your money, you're giving it the opportunity to grow at a rate that outpaces inflation, helping you to maintain the value of your money over time.
Assessing Your Financial Situation
Before you start investing, it's important to assess your financial situation. You should have a clear understanding of your income, expenses, and debts, as well as your short-term and long-term financial goals.
It's also important to have an emergency fund in place before you start investing. An emergency fund is a savings account that you can use to cover unexpected expenses, such as a car repair or a medical bill. Ideally, your emergency fund should have enough money to cover three to six months' worth of living expenses.
Understanding the Risks of Investing
Investing comes with risks, and it's important to understand these risks before you start investing. The value of your investments can go up or down, and there's always the risk that you could lose money.
One way to manage risk is to diversify your investments. Diversification means spreading your money across different types of investments, such as stocks, bonds, and real estate. By diversifying your investments, you're reducing the risk of losing all your money if one investment performs poorly.
Choosing a Platform
There are many platforms available for investing your money, and it's important to choose one that's right for you. Some platforms charge fees for buying and selling investments, while others offer commission-free trading.
One platform that I recommend for beginners is Trading 212. Trading 212 allows you to invest straight into the stock markets without having to pay any commission. The website and app are both pretty intuitive to use, and it offers over 10,000 stocks and funds for you to invest in.
Setting Up Your Account
Setting up an account with Trading 212 is pretty straightforward. You can register using the link in the description of this video, and as soon as you make your first investment, you'll get a free share with up to £100 credited straight into your account.
The registration process itself is pretty straightforward. Click "Open an Account," select the country that you're based in, and then select either the ISA account if you haven't already opened an ISA since April, or if you have, select the investment account.
Choosing Your Investments
As a beginner investor, my advice is to consider an ETF or exchange-traded fund. By doing so, you get the immediate benefit of diversification through the fact that the ETF is indirectly invested in hundreds of companies. Additionally, the fees are low, and it's effectively a passive investment, so you don't need to worry about keeping on top of an individual company's news.
If you're looking for exposure to the UK's listed companies and the UK economy, I'd consider the Vanguard FTSE 100 and FTSE 250 ETFs. If you're looking for exposure to the US market, I'd consider the Vanguard S&P 500.
Investing in ETFs
To invest in an ETF, click into the fund, press "Buy," select your investment size, and then press "Send by Order." If it's during the week and the markets are open, then your order should be executed immediately.
Investing in Individual Stocks
If you want to invest in individual stocks, it's important to do your research. Don't be fooled into thinking that just because a company is well-known, it's likely to do well. Always diversify by investing in multiple companies and multiple industries as best you can.
Making Your First Investment
Once you've chosen your investments, it's time to make your first investment. Invest your first £100 and give yourself a pat on the back because you've just made your very first investment.
Monitoring Your Investments
Investing should be seen as a medium to long-term activity. Try not to keep looking at the Trading 212 app on an hourly basis and then making decisions based on daily performance. Keep making regular investments if you can, ideally on a monthly basis, and if possible, invest into your ISA for tax-free returns.
Conclusion
Investing your first £100 can be a daunting task, but it doesn't have to be. By following the steps outlined in this guide, you can start investing your money and growing your wealth. Remember to assess your financial situation, understand the risks of investing, choose a platform, choose your investments, make your first investment, and monitor your investments. Good luck!
Highlights
- Investing is a way to grow your wealth over time and protect your money from inflation.
- Assess your financial situation and have an emergency fund in place before you start investing.
- Diversify your investments to manage risk.
- Trading 212 is a beginner-friendly platform that allows you to invest straight into the stock markets without having to pay any commission.
- Consider investing in ETFs for immediate diversification and low fees.
- Invest your first £100 and monitor your investments regularly.
FAQ
Q: How much money do I need to start investing?
A: You can start investing with as little as £100.
Q: What is an ETF?
A: An ETF or exchange-traded fund is an investment that tracks the value of hundreds of different companies' share prices.
Q: What is diversification?
A: Diversification means spreading your money across different types of investments, such as stocks, bonds, and real estate.
Q: What platform should I use to invest my money?
A: Trading 212 is a beginner-friendly platform that allows you to invest straight into the stock markets without having to pay any commission.
Q: How often should I monitor my investments?
A: Investing should be seen as a medium to long-term activity. Try not to keep looking at the Trading 212 app on an hourly basis and then making decisions based on daily performance. Keep making regular investments if you can, ideally on a monthly basis, and if possible, invest into your ISA for tax-free returns.
Resources
- Trading 212: https://www.trading212.com/
