How to invest

Investing: Stocks and Shares ISAs, funds, risks, buy-to-let, peer-to-peer and more explained

Our full guide to finding a platform, managing your investments, minimising tax and staying safe.

Why invest?

Many of us already do the hard work, taking money, every month, to put in our savings accounts.

So why aren’t our savings growing?

Low interest rates and high inflation mean that, in most savings accounts, your money is actually losing value every year.

Investing gives you the change to beat inflation and potentially make even more money. It could also help you buy your first home or prepare for retirement.

However, you’ll need to be prepared to take at least some risks, invest your money for at least five years and, ultimately, be prepared to lose your investment.

That’s why you should only start investing if you’ve saved up a ‘rainy day’ fund, to cover you in the case of emergencies.

Still interested? Let’s begin.

Compare investment platforms on loveMONEY’s investment centre

Getting started

There are two levels to an investment: how you invest (the platform), and what you invest in (your portfolio).

Start by deciding whether you want a Stocks and Shares ISA, which means you don’t need to pay tax on your investment profits, a different type of ISA, or a general investment account. There are ISAs for children, first-time buyers and retirement.

Then decide which platform you want to invest with. Fees matter – a few percentage points can mean thousands of pounds over time.

Many platforms let you pick your own stocks and funds to invest in. There are now also ‘robo-advice’ platforms that can build you a personalised investment portfolio.

It’s also possible to invest ethically and even platforms that can build you a personalised ethical portfolio, whether you want to fight climate change, promote gender equality or good governance.

Confused? Then maybe you should consider getting financial advice – here’s what to expect.

If you'd rather grow your money without risks, compare savings accounts

Managing stocks and shares

Think carefully about making your investments, because most experts recommend you don’t tinker with them.

With 24/7 news coverage and smartphone investment apps it can be tempting to chop and change investments, but that’s not always the best strategy.

Think carefully before tinkering with investments (image Wang Ying Xinhua News Agency / PA)

If you want to better invest, start by understanding how risky your investments are.

It also helps to understand stock tips and what labels like ‘add’ and ‘underweight’ actually mean.

Then consider investing strategies such as ‘income investing’ and look at the approaches of fund manager Dame Helena Morrisey and top traders like Rodney Hobson and Robbie Burns.

Every week, loveMONEY rounds up the experts' share tips - find the latest here

Buy-to-let investing

If you feel more comfortable investing in bricks and mortar, then buy-to-let – i.e. being a landlord – could be for you. Just don’t fall for the widespread property myths out there.

Getting started is a little more complicated than just buying a property.

Do you want to rent the entire property, or divide it into a ‘house of multiple occupancy’? Should you set up a limited company? Could you use money from your pension?

Once in place, you’ll need to deal with tenants, stay insured and control costs – especially given tax rules for landlords are changing hugely.

Rob Bence, the presenter of the Property Podcast, has put together a Buy-to-let Masterclass series of articles.

It’s also possible to invest in property without buying one yourself, through peer-to-peer mortgage lending platforms.

How to invest in property (image: Shutterstock)

Peer-to-peer investment

There’s a new type of investment out there that allows you to lend directly to a business or borrower that needs it the most.

Peer-to-peer (P2P) platforms connect lenders and borrowers. Returns vary and tend to correlate with the amount of risk you’re taking, so it’s essential to do your research before investing.

We’ve got reviews of popular sites like Funding Circle, Ratesetter, Lending Works, Zopa and Landbay.

You can use an Innovative Finance ISA (IFISA) to make sure you don’t pay tax on your profits: the P2P platforms provide these.

Compare Peer-to-Peer investments and platforms here

Gold, luxury and crypto investing

You can invest in almost anything – the question is whether you should.

Gold has historically been a fall back for individuals and entire countries: just make sure you don’t overpay for it.

Cars, artworks and vintage wines fall into the category of luxury investments, which can be a fun although not necessarily money-making pastime.  

Luxury investments won't necessarily make you money (image: TEND Swiss)

Day trading of stocks and foreign currencies can be exhilarating but is far from easy. Read what happened when our own reporter gave it a go

For beginner investors, commodities and cryptocurrency can be problematic – click on the links to learn more.

Gold: the pros and cons of investing in the precious metal

Easy income strategies

You don’t need to start with savings to make money: you can also make money from your possessions.

You could rent out your spare room or entire home on Airbnb and there are even tax loopholes available. Just don’t forget to tell your mortgage lender.

We’ve got a guide to renting out every part of your property, even your attic, garage and driveway!

For more on earning extra cash read out guide to 'easy ways to make money'

Investment scams

Sadly, investing attracts a range of crooks, from ‘get rich quick’ schemes offering unrealistic returns through to criminals who simply take your money and vanish.

A healthy dose of scepticism will help you keep safe, as does checking a company is FCA-regulated. The FCA’s ScamSmart website can show you if a company has been in trouble before or if an investment is highly risky.

We’ve written about forex scams, pension scams, cold call scams and scams advertised on Facebook.

Even experienced investors have been hit by scams, so stay vigilant.

Are you a first-time or experienced investor? Is there anything we haven't explained, or do you have any tips to share? Please give us your feedback in the comments below.

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