Investing for beginners

Our beginner's guide breaks down the basics, making it all a bit simpler if you’re new to investing. 🏆

Authored on
20 Feb 2024
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Category
Getting started
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Read time
  7 minute read

For anyone stepping into investing, it might seem like a daunting expedition. On one hand, the allure of the stock market's potential for returns beckons, while on the other, the investment landscape is notorious for its complexity, time, risks, and a maze of perplexing jargon. 💼

But here's the deal: investing doesn't have to be the enigma it's made out to be. 🌚

Our investing for beginners guide at Dodl is your trusty companion on this journey. It navigates through the basics, from the whys of investing to the different investment types and the tax-efficient accounts to nestle them in.

Consider it your shortcut to grasping the essentials, making phase 1 of your investing journey a Dodl! 🚀

Why invest over save?

Choosing between saving and investing is the first step to putting together your own financial puzzle —it's all about your circumstances and your vibe when it comes to risk. ⚠

Saving in cash 💰

  • Swift access, no hassle. Need quick cash at your fingertips, especially in the short term? Cash might be your go-to.
  • For a lot of people, cash savings are a ‘safe haven’: no rollercoaster of investment risks—just smooth sailing. ⛵
  • Careful though, if inflation outpaces your savings interest, your money's spending power takes a dip.

Investing 📈

  • Want the potential for bigger returns? Investing takes the stage here, especially in the long-term. 💃
  • Compared to cash, investments give your money a better chance to beat the rate of inflation.
  • But, and there's always a but, brace yourself for a bit of a rollercoaster ride of ups and downs – there is the chance that you could lose money. 😨

What should I invest in? Let’s unpack 👜

So, you’ve got the investing bug – awesome! Now, the real magic begins as we unravel the (quite literally) million-pound question: what should I invest in? Let’s break it down into four key points to help you through this financial adventure:

  1. What's the mission? Define the purpose behind your investment journey. 🤔
  2. Time is on your side. How long do you want to stash away those funds? ⏳
  3. Quantify the dream. What's the savings target you're aiming for? 🎯
  4. Risky business. How much risk are you willing to take? ⚠

These answers become the compass directing your investment choices. Whether you're eyeing up that dream house or plotting a cosy retirement 30 years from now, your investment portfolio should match your mission. 😎

Risk: what’s all the fuss about it? 🤔

Before you embark on your investment journey, let's talk risk – or as the pros call it, your 'attitude to risk' or 'risk tolerance.' Each investment has its own thrill level, and you want to make sure it aligns with your personal financial style.

Many newcomers to investing might get caught up, picking risk levels that they’re not ready for. It's all about how comfortable you are if your money takes a downturn and falls in value. 👇

Having sleepless nights at the thought? Maybe stick to the smooth, lower-risk moves. But if you're cool, collected, and won't break into a panic if the markets dip, you might just be ready take a little more risk. ⛑

Oh, and time — let's not forget the clock! The longer your give your investments, the more flexibility you have for riskier endeavours. Higher risk often means the potential for greater returns, and if you have the patience for the long game, those investments have more time to grow! ⌛

What are the different types of investments? 🤔

Knowing what to choose from the investment toolbox can be tricky, especially with the sea of jargon out there. So, let's delve into the four main investment avenues on offer to you.

Shares 🏛️

When you buy shares (also known as stocks), it's like taking ownership of your slice of a company. The worth of your shares moves in time based on company performance and other factors like market conditions. If the company performs well, it's likely your shares will too.

Funds 🤝

A fund is essentially a blend of shares, bonds, and a maybe touch of cash, all expertly orchestrated by a professional fund manager. Funds offer you a diverse investment portfolio with the ease of someone else's financial finesse – perfect for those stepping into the investment arena for the first time. 😎

Bonds 🛡️

Welcome to the world of bonds, where lending money to companies or governments comes with the sweet reward of interest. Bonds offer a smoother investment journey, with fewer highs and lows compared to the rocky ride that you sign yourself up to when investing in stocks. They’re usually considered less risky than shares and are likely to give you a lower return over the long-term.

Exchange-traded funds ✨

ETFs trade on the stock market, often tracking an index (like the FTSE 100). They're like a basket of shares mirroring the index's performance, spreading your investment across all the index's companies.

How often should I invest? ⏳

So, you're dipping your toes into the investment waters, and this question pops up. 🎈

There are a couple of ways to go about it, but whether you choose to invest regularly or with a lump sum, keeping tabs on your investments is key. Just remember, investments are like fine wine – they need time. 🍷

Timing your moves: regular vs. lump sum ⏰

You've chosen what to invest in, but the decision doesn't end there. Do you want to make a grand entrance with a lump sum, or prefer the steady rhythm of regular investments? Either way, you don’t need a fortune to get started. 💰

Embracing regular investing and 'pound-cost averaging' 🔄

Regular investments not only nurture your savings habit but also leverage the clever 'pound cost averaging' trick, which can help to boost your returns over time.

Committing a fixed amount monthly, regardless of market fluctuations, minimises the risk of a making a big market entry at a bad time. This savvy strategy lets you buy more when markets dip and fewer when they rise, helping to smooth out market fluctuations. Trying to 'time the market’ is a pitfall even for seasoned investors. 👎

Choosing the right Dodl account for you 🚀

Deciding on the perfect Dodl account? It's all about aligning your investment goals and unique needs. Each account comes with its own set of perks tailored to specific savings objectives. However, keep in mind that there are limits and risks associated with each account type, so choosing wisely is key. 🦉

At AJ Bell Dodl, we offer four investment account options, each catering to different financial needs:

  • Investment ISA – build your savings tax-free and embrace financial growth
  • Lifetime ISA – your ticket to saving for that dream home
  • Pension – get set for retirement and ensure a financially secure future.
  • General investment account – invest without limits on payments and withdrawals

It all depends on your goals and ambitions, so explore the benefits and weigh the limits. ⭐

How do I get started with AJ Bell Dodl?

With your phone in hand and the Dodl app at your fingertips, opening your chosen account is a breeze – just a few taps away! Plus, there's no need to limit yourself to just one account If the investment landscape feels overwhelming, check out the Dodl website for comprehensive account info and key features. 📲

Sound good? If you fancy giving it a go, start your Dodl journey today! 🚀

 

 

🔔 Always remember, the value of your investments can go down as well as up. Dodl doesn’t give advice, so if you’re unsure about investing, it’s always best to speak to a financial adviser.

 


It's important to know

You have to be solely a UK citizen and resident to open an account with Dodl. If you're not solely a UK citizen but still want to invest, you may be able to open an account with our parent platform AJ Bell. 

The past performance of investments isn't an indicator of their future performance and their value can go down as well as up. This means you could get back less than you originally invested. 

Dodl doesn’t offer any advice so if you’re not sure about the risks involved with investing, you should speak to a suitable financial adviser. 

How you're taxed depends on your circumstances, and tax rules can change in future.