Getting ready to invest

Things to check and understand before you start your investing journey.

Authored on
24 Nov 2022
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Category
Why invest?
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Read time
  4 minute read

Dodl is all about simple no-nonsense investing, but only if you’re ready – so it’s really important to make sure you’re in a good starting place before investing. Here we’ll go over some of the main checks which’ll help you decide if you’re ready to get started. So let’s check yourself before you invest yourself! ✅ 

Check #1: Clear the debts 🧹 

If you have any short-term debts – like credit card or payday loan debt – then it’s a good idea to clear those before you start to invest. That’s because they often have high interest rates attached to them, which could be higher than anything you might stand to gain through investing. (Short-term debts don’t include ‘good’ debts like mortgages or those pesky student loans).  

A good way to pay down any debt you have more quickly is to shift it to the cheapest option available i.e. one with a lower interest rate. This means more of the money you’re using to pay off your debt is going towards the debt itself, rather than just the interest. 

It makes sense to get yourself in the best financial shape possible before putting any money into investments for the long term. So once you’re in the clear you may be in a better position to invest some of your money, and get it working that little bit harder for you. 💪 

Check #2: It’s all in the prep 💰 

Being prepared to invest is about making sure you have enough cash easily available for all your short-medium term wants and needs, plus a little extra for emergencies, before investing anything that’s left over. That’s because any money you invest should usually be kept there for at least five years – this is to give it the best chance of growing. So, if you can manage to, you shouldn’t reach for the ‘sell’ button on your investments for as long as possible.  

To make sure you’re prepped before you invest, you’ll need to have enough easy-access cash for:  

  • all your monthly bills, rent/mortgage, and all the basics (food, fuel, fitness etc…) 

  • your short-medium term financial goals (like that holiday next year, or a new car)  

  • an ‘emergency fund’ – for all those things we hope never happen but are best to be prepared for (…see last year’s MOT! 😩) 

It’s quite easy to figure out how much you need for your monthly bills and basics, and those bigger upcoming spends (hello spreadsheets! 📊). But how much should we keep earmarked for emergencies/costly surprises? Well, most budgeting experts recommend keeping at least three months’ worth of outgoings in an easy-access savings account, ready for any of those little (or big) unexpected costs. We’ll call it your ‘cash-cushion’ – nice and comforting! 

Three months’ outgoings are just a minimum really, if you’ll be more comfortable having a larger cash-cushion go ahead and build up your easy-access savings pot. Once you’ve figured out how much of your monthly income and savings you want and need to have quick and easy access to, whatever you have left over you could choose to invest for the long term. 

Check #3: Be risk aware ❗ 

We go into more detail on the risks of investing later in the Why invest series, but it’s worth mentioning the headline here: investing carries risk. But what does this mean? It means that making a profit or generating income from your investments isn’t guaranteed – you could lose money as well as make it and end up with less than you started. That’s why it’s generally said that you shouldn’t invest money you can’t afford to lose.  

Compared to cash savings, investments carry more risk. But with that comes the potential for greater rewards (returns on your investment), and the opportunity to beat the rate at which the cost of living is rising (this is called ‘inflation’). Learn more about this in the protect and grow your money article. 

Check #4: Go long 🚀 

You’ll see lots of references to ‘your investing journey’ with Dodl, that’s because investing takes time – it’s a marathon, not a sprint.  

Buying investments should be viewed as a long-term option for your money. It’s usually best to allow at least five years for your investments to grow and ride out any bumps in the market but, in general, the longer the better. And you don’t want to have to take money out of your investments before they’ve had a real chance to grow. So here’s your reminder to make sure you’ve got your cash cushion sorted (#itsallintheprep)! 💰  

Check #5: Always remember, investing isn’t a game 🎲  

In support of InvestSmart 

Don’t roll the dice on your financial future. Choose an investment app/provider which is regulated by the Financial Conduct Authority and keeps your financial safety at the heart of everything they do.  

AJ Bell is the investment platform and FTSE 250 company behind the Dodl app and your Dodl accounts. It's been making investing affordable and accessible for over 25 years (with the awards to prove it 🏆). One of the UK's largest and most trusted investment platforms, it's authorised and regulated by the Financial Conduct Authority and your cash and eligible investments are protected by the Financial Services Compensation Scheme up to £85,000. With Dodl, you’re in safe and experienced hands. 

Dodl offers you a wide range of what the FCA call ‘mainstream investments’ which, though carry risk, are common and popular investment options which offer the potential for long-term gains. They include managed, regulated funds and shares which trade on a registered stock exchange – like the London Stock Exchange. Learn more about these types of investments and the options available to you with Dodl

Ready? ✅

If you’re happy you’re in a financial position to start investing (checks #1&2), and you’re feeling comfortable about what to know before investing (checks #3,4&5) – then you could be ready to begin your investing journey! 🙌 Get started with Dodl or, if you’re after a little more background knowledge, check out more articles in the Why invest series. 

 

Get started today

 

🔔 Remember, investing carries risk and nothing in this article should be taken as advice - Dodl doesn't give advice, but we do hope the info is helpful!


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.