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Beginners guide to investing 🔍

If you’ve decided you want to seriously look into investing, starting that very journey can be daunting, especially as a complete beginner. That’s why we’ve created this succinct guide to help you navigate some of the complexities of investing, empowering new and would-be investors to make informed decisions and make the most of their personal wealth.

What is investing?

Investing is the process of buying assets, such as stocks and shares, bonds, ETFs, and other asset classes, to make a long-term financial return, typically over a time horizon usually of at least a year. People usually invest for long-term financial goals like buying a house, a car or planning for retirement. 

Why do people invest?


People invest to achieve personal financial goals and build wealth over time. By putting their money into various assets, investors seek returns in the form of capital appreciation, dividends, and interest. Investing offers a means to grow one's money while giving individuals an opportunity to beat inflation and secure a more prosperous financial future.

What do people invest in?


People invest in a diverse array of assets to build a well-rounded portfolio. This can depend on several factors like personal preference, risk tolerance, investing time horizon, and one’s personal financial goals. Common investment options include stocks and shares, which represent ownership in companies; funds like ETFs (Exchange-Traded Funds) that combine multiple investments into a single pooled fund and bonds, providing fixed-income returns. Alternative assets, being any investment asset that falls outside the traditional categories of stocks, bonds, and cash, are an increasingly popular investment option including physical assets, commodities, real estate, crypto, alcohol, cars, and more.


Risk tolerance and financial goals

Understanding your risk tolerance and thinking about clear financial goals are pivotal aspects of successful investing as a beginner. Risk tolerance reflects your comfort with market fluctuations. You may prefer stable, low-risk investments, while others may embrace higher-risk opportunities for potentially greater returns. Setting goals personal to you, whether for short-term gains or long-term financial security, guides informed investment decisions. Aligning your risk tolerance with achievable goals ensures a well-balanced portfolio, giving you a better chance at navigating the unpredictable nature of financial markets while working towards your desired financial outcomes.

Risk vs reward


Risk represents the uncertainty inherent in the market, and it varies based on the type of investments and money decisions you make. While higher-risk ventures can offer the potential for greater returns, they also carry a heightened chance of losses. On the reverse, low-risk options, like saving, may offer more stability but usually come with more modest returns. Striking the right balance between risk and reward is the key. Understanding your risk tolerance and financial goals guides you in choosing investments that align with your comfort level and desired outcomes, ensuring a prudent approach to wealth-building from the beginning of your investment journey.


Risks to consider before investing

Investing, while offering the potential for financial growth, comes with inherent risks. Understanding these risks is crucial for making informed decisions, including whether or not investing is suitable for your current financial position. Here are some common risks associated with investing:


Market Risk: The value of investments can fluctuate due to changes in market conditions, economic factors, or geopolitical events.

Interest Rate Risk: Fluctuations in interest rates can impact the value of fixed-income securities, such as bonds.

Inflation Risk: Inflation erodes the purchasing power of money over time, affecting the real returns of investments.

Liquidity Risk: Some investments may be difficult to sell quickly without a significant impact on their price.

Currency Risk: If investing in foreign assets, changes in currency exchange rates can affect returns.

Political and Regulatory Risk: Changes in government policies, regulations, or political instability can impact investments.

Systematic and Unsystematic Risk: Systematic risks are market-wide, while unsystematic risks are specific to individual investments or industries.


Volatility RiskInvestments with high volatility can experience significant price swings, leading to rapid potential losses.

Operational Risk: Issues within the investment platform, brokerage, or fund management can impact the execution and management of investments.


Black Swan Events: Rare, unpredictable events with severe consequences, known as black swan events, can disrupt financial markets.


How to manage risk

Now you understand more about the inherent risks that come with investing, considering ways to manage this risk is prudent for long-term wealth building. Here are some common risk management measures with investing:


Understand your risk tolerance

Assess your comfort level with market fluctuations and potential losses. Knowing your risk tolerance helps in selecting investments aligned with your psychological and financial resilience.


Diversify your portfolio

Spread your investments across different asset classes, industries, and geographical regions. Diversification can mitigate the impact of poor-performing assets and enhance overall portfolio stability.


Set clear financial goals

Define your investment objectives, whether they involve short-term gains, long-term wealth accumulation, or specific financial milestones. Clear goals provide direction and shape your investment strategy.


Start with a solid foundation

Save first, then only invest money you can afford to lose. Consider beginning with well-established and reputable investment options, such as low-cost ETFs. As you gain experience, you can explore more complex investments.


Educate yourself

Continuous learning is key. Understand the intricacies of different investment types, market trends, and potential risks. Informed decisions based on knowledge are crucial for effective risk management. Download the free Pluto app to continue educating yourself.


Emergency fund

Maintain a separate emergency fund in easily accessible cash. This provides a financial safety net, ensuring you won't need to liquidate investments in case of unexpected expenses.


Regular portfolio reviews

Periodically assess and rebalance your portfolio. Market conditions change, and your asset allocation should adapt to align with your risk tolerance and financial goals.


Consider time horizon

Determine your investment time horizon. Longer time frames allow compounding to work to an increased effect and also help smooth short-term price volatility, giving you the best chance to grow your money steadily and reliably.

Stay informed on market conditions

Keep abreast of economic indicators, market trends, and global events. Awareness allows you to make timely adjustments to your portfolio based on changing market conditions.

Should I save or invest?


Generally speaking, it is good practise to have ample savings, and an additional emergency fund in place for any unexpected bills in place, before you consider investing. After this, if you do decide to invest, start small and remember consistency beats intensity when it comes to investing. Time in the market, beats trying to time the market. Only ever invest money you can afford to lose, as the value of your investments can go down as well as up.



How to get started investing

To start, you’ll need to research and choose a reliable, secure platform that offers investing in the UK. You may want to consider things such as minimum deposit amounts, fees, customer service, and any other things important to you in a prospective platform. You’ll also want to consider the risks of investing before getting started. There’s a huge number of potential providers around, such as Fintechs, banks, neobanks, and start-ups, so it can be hard to find the right one. It may help to start by deciding how and what you’d like to invest in. Stocks, ETFs, alternatives, crypto, perhaps even through a Stocks and Shares ISA? It’s entirely up to you. We’ve provided helpful comparison tables for all the above categories, and more to help you on your journey.


What is the sign up process like?


Once you’ve found the right provider, you’ll be required to sign up and create an account. This process varies between providers and usually takes no more than 10 minutes for most providers. The process will almost certainly involve some form of KYC (Know Your Customer) procedures. KYC involves verifying your identity, assessing your financial situation, and understanding your investment goals. This is a completely normal part of the sign-up process and is required from a legal and regulatory perspective to safeguard both investors and the broader financial system.


How much do I need to start?

Almost all investment platforms have a minimum amount you can invest. This is the lowest amount of money an investor can add to their account, and use to buy things like shares. In the UK, this generally ranges anywhere between £1-£50, but can even be as high as £500 or more with certain providers of certain accounts. We’ve created helpful comparison tables of investment platforms and their minimum deposits, so you can find this information easily in one place. 


What should I investment in?

What to invest in depends entirely on you. You’ll want to consider all of the information above, like your investment goals, what level of risk you are prepared for, and even what time horizon you’d like to invest on, and more. Be sure to take your time and not rush into any investment. Educate yourself at your own pace and make the most of free financial literature available on insight, including on the free Pluto app and in articles across the website. 


Before you invest

Before making any investments, you must understand the risks involved and only invest money you can afford to lose. Do your research or consult with a qualified financial advisor if you need expert support.


Is investing right for me?

It may not be and that is okay. Deciding whether or not investing is right for you depends on you. Be sure to be fully aware of the complexities of investing before risking any real money. It’s always a good idea to have ample savings and an emergency fund before considering investing your money. Pluto has a free simulation investing environment, available on the iOS app store, so you can practise in a risk-free environment, without real money.



Interested in learning more about the world of investing but don’t know exactly where to start? We would always recommend practising without any real money before you start. Try the Pluto demo (no real money) environment on the free Pluto app

What is investing?
Why do people invest?
What do people invest in?
Risk and financial goals
Risk vs reward
Risks to consider
How to manage risk
Should I save or invest?
The sign up process
How to get started investing
How much do I need to start?
What should I invest in?
Is investing right for me?
Before you invest
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