Is investing for me?

Is investing for me?

If you strip away the jargon, investing is not as hard as it sounds, and there are lots of ways to start.

But bear in mind, this is just an introduction. You'll need to do your research or take financial advice before parting with any of your cash! More on that later.

Is investing for me?

First, what is investing?

Investing can be a misunderstood concept. We hope to demystify it a bit.

An image of a professional trader watching the markets on multiple screens full of flashing numbers might spring to mind. 

Forget about the cliches, because we want to talk about investing as a sensible strategy for YOU for the long term.

All it means is putting money into a range of assets such as shares or funds or government bonds rather than into a savings account.

Why would I consider investing?

When savings rates are as low as they are now, cash left in deposit accounts is losing value because the rate of inflation is higher than the rate of interest it is earning. 

The theory is that if that money is invested then it will earn a better return - particularly over a longer period of time. It's that simple, or should be. And you don't need to be a professional trader to do it.

Am I in the right financial situation to start investing?

You shouldn't invest money that you might need to get to in the short term. You should only start investing if you have an accessible cash buffer that you can draw on for emergencies - financial advisers usually recommend at least three months' salary.

The Money Advice Service suggests that if your savings goal is more than five years away, putting some of your cash into investments could allow you to earn more from your money and keep up with rising prices.

Some financial advisers reckon that ten years is the minimum you should be prepared to lock away your cash - and if you are unsure you should seek professional advice.

How much do I need to start investing?

People are often put off investing because they assume they need huge amounts of money to invest. This is not true, but the amount you are willing to invest will depend on your goals, attitude to risk and current financial situation.

You can start investing with a lump sum or by putting aside a certain amount each month - and a new range of apps makes it possible to invest very small amounts. Read our guide to micro-investing.

What would I invest in?

Investors are usually advised to spread their money across a variety of asset classes. This is called diversification.

Some assets are riskier as they can increase in value quickly but also lose value quickly, while others are more stable but offer less potential return.

At one end of the spectrum, individual company shares (also known as stocks or equities) can offer quick returns - but also quick losses. They require a lot of research and accepting quite a high level of risk. At the other end are government bonds, which tend to be more stable but sometimes offer low returns.

So, many beginner investors first take the plunge by investing in funds. These are vehicles that invest money on behalf of people and institutions. They can be invested in shares, government bonds, property or commodities - or a combination of any of these.

What do I need to start investing?

You might already be an investor through your company pension if you have one. Read our guide to getting under the bonnet of your company pension here.

But most people start investing by opening a stocks and shares Isa (individual savings account). This is a tax-free wrapper that your investments sit inside.

And you need to do some research and/or take some financial advice from an independent financial adviser!

We have put together Six easy steps to start off investing, including how to get advice.

Read more: Why your first 10 years of saving could be more powerful than the next 40 combined

Six things I'm doing to live more sustainably

Six things I'm doing to live more sustainably

Six quirky ways to save money

Six quirky ways to save money