Most of us know that one of the best ways to grow our money is to invest it and tap into the stock market. But all that talk of 'indexes' and 'yields' is enough to baffle the brain.
So we end up sticking our cash into a savings account and forgetting all about it. We'll cut through the jargon and ditch the tricky terminology, so you can weigh up the pros and cons and decide if investing is right for you.
What should you invest money in?
The first decision you’ll have to make is what to invest your money in. Individual companies or investment funds that invest in shares (sometimes called equity funds)? Household names or smaller startups?
If you’re just starting out, investing in individual company shares probably isn’t the right option for you. It’s simply too risky to tie your money to the fortunes of one or two companies.
That’s why so many people prefer to invest in funds instead – and you might too, especially if you’re not a stock market whizz.
Funds invest in dozens (if not hundreds) of different companies. And when you invest in a fund, your money’s spread between those companies.
Depending on the fund you choose, your money could be invested in big and small companies across a load of different countries and sectors.
And different funds will have different approaches to risk too. So you’ll need to decide what level of risk you’re comfortable with.
Active or passive?
The next big decision you’ll have to make is whether to invest ‘actively’ or ‘passively’. All this means is how the funds you invest in are run.
If your funds are actively managed, there’s a fund manager who’ll research and decide what shares to buy, what ones to sell and when to do it all. With actively managed funds, you may outperform the market; however, you may also underperform it depending on the decisions your fund manager makes.
If it’s a passive fund, it’ll track a particular stock market index (like the FTSE 100) and try and mirror what happens to that index. So, if the FTSE 100 goes up by 10%, so should your fund. And if it falls by 10%, the fund should fall by 10% too. Passive funds often have lower costs than active funds so you should get to keep more of the return.
So what’s the best approach to investing? Experts see value in both approaches and often combine them to make the most of your money.
Where to invest money in the UK?
From going direct to taking advice, there are a number of ways you can invest your money in the UK.
Again, there are pros and cons to each approach – and it’ll likely come down to how confident you feel and how much money you’ve got.
Investing with the help of an independent financial adviser
If you want advice from an expert, you should talk to an independent financial adviser. This can be a good option if you’ve got a lump sum to invest or if you don’t feel confident doing your own research.
You’ll get advice on what to invest in and the adviser can take your wider financial goals and plans into account too.
But expert advice doesn’t come cheap. Financial advisers charge anything from £100 to £300 per hour, or per meeting with you. Or they may charge you an annual amount/set fee depending on the type of service they provide.
Investing through a platform
Think of a platform as an online supermarket for investments (but without those weird substitutions on your delivery).
A platform lets you buy, monitor, switch and sell your investments. There are two main ways you can invest through a platform:
- You can choose which stocks or funds to invest in yourself. Most platforms have lots of information about the funds they offer.
- You can choose a ready-made portfolio. You’ll normally have to answer some questions about why you’re investing, how long you’re investing for and how much risk you’re willing to take.
A platform is a low-cost way of getting started in investing. And you can invest in a wide range of stocks or funds and keep all your investments in one place.
But the main drawback is that you’ll have to pay the platform for using it. And there are normally a number of different fees, which vary from one platform to another.
Want to cut out the middle man? Go to the company that provides the investment funds and buy from them direct.
If you know what investment you want this can save you cash as you won’t have to pay a financial adviser.
But if you invest in different funds from a range of providers, you might have quite a job on your hands keeping track of them all.
Virgin Money view
We know investing can seem complicated. But it doesn't have to be that way. We believe everyone should have the opportunity to try and grow their money on the stock market.
That’s why we’ve created three brilliantly simple investment funds. They’re only available direct from Virgin Money. Plus they’re easy to understand and regular payments start from just £25. So you don’t need to be an investment guru or a billionaire to get started.
Interested in finding out more about how we’ve made investing simple? Check out our investment pages and take a look around.
Remember, the value of investments can go up and down, so you may get back less money than you put in. Tax depends on your individual circumstances and the regulations may change in the future.