The investment landscape continues to evolve and is dynamic due to various economic conditions. As a beginner in this landscape, you must understand how to invest and choose the best asset classes with growth potential in the long run. Also, choose the best investment broker that offers adequate skills and strategy development tools. After all, you want to put your money in an investment that will potentially grow your wealth.
In this beginner’s guide to investing, we take you through how to invest and list the best investment strategies. Plus, we recommend the top investment brokers in the UK and how to identify one should our recommendations not suit your needs.
In this guide
Top Investment Options for Beginners
You probably must be wondering about the suitable investment options to venture into. Besides the popular retirement investment offered by employers, you can put your money in the financial market through the below assets.
Stocks
A stock is one of the popular investments in the financial space. Also known as equities, they are shares of companies that investors purchase to earn profits with appreciating value. Note that a single stock contains multiple shares, and you can purchase them via a credible broker or exchange. You simply have to identify the best stocks or shares with growth potential before making a move.
Besides investing in company stocks, beginners in the UK can also trade stocks as CFDs. But first, it would be better to start with the broker’s demo account. Stock CFD trading is whereby you do not take ownership of the underlying asset but rather speculate on its share price movements. The difference between the asset’s price at the end of an investment will be your profit or loss. Additionally, the stock market also gives you an opportunity to invest in an index. Index trading is putting up your money on a collection of various company stocks in a single investment.
Find out about Jaguar Land Rover stocks in our other article.
Mutual Funds
Beginner investors in the UK can also invest in mutual funds through a mutual fund broker, which offers a combination of multiple investments. Here, you do not need to pick a single stock or bond to invest in but rather purchase numerous collections in a single transaction. Simply put, mutual funds are a diverse investment, making them less risky than purchasing a single share of stock. It includes changing lists of securities in various markets chosen by an investment manager.
Keep in mind that a mutual fund is not an index because mutual funds are managed by professionals. This also means index trading is cheaper than a mutual fund since it is not actively managed.
Bonds
Bonds are another excellent investment option for beginners in the UK. They are loans you will give to a company or government institution, which they will pay back with interest within a specified period, probably after a few years. The best element about investing in bonds is that there are no financial risks of having your investment depreciate. You know the exact amount to earn within a certain period.
In the financial market, less risky investments will potentially bring about small amounts of profits. Therefore, bonds earn lower long-term profits compared to investing in stocks within the same timeframe.
Exchange-Traded Funds (ETFs)
ETFs are like mutual funds whereby they hold multiple investments in a single bundle. What differentiates them is that luke stocks, an ETF trades throughout the day and are bought for a share price. Moreover, ETFs’ share prices are lower than mutual funds’ minimum investment requirement. This makes them an excellent option for new budget-conscious inventors in the UK.
Top 3 Investment Brokers in the UK
To enjoy investing in the UK, you need the best broker with adequate resources. The broker should also fit your investment requirements and be regulated by the Financial Conduct Authority (FCA). In addition, it must have access to various exchanges where stocks are listed and allow various investment methods such as CFDs, indices, mutual funds, bonds, and ETFs.
Note that it is not easy for beginners to find the best broker for investing since there are numerous in the region. The good news is that we did all the legwork and recommend the top three below based on multiple tests and comparisons.
1. eToro
It has been more than a decade since the establishment of eToro, and the broker’s popularity continues to skyrocket. Over 2,000 assets are available to invest in, and you only need a minimum deposit of $100 to get started. The broker is user-friendly, has an intuitive design platform, and hosts a plethora of learning resources to develop your skills. Plus, there is a £100,000 virtually funded demo trading account to test your skill level as you become more independent.
Beginner investors will enjoy using eToro because it features an excellent copy and social trading platforms. These platforms connect you to other new traders globally, where you will learn trading tips by sharing ideas. You can also follow expert traders so that whenever they open a potentially profitable position, it will be easier for you to mirror them and maximise your profitability.
✔Low minimum to fund an account and begin investing
- User-friendly and customisable platform perfect for newbies
- You only need to deposit at least $100 to access over 2,000 investment assets eToro hosts
- Beginners can take advantage of eToro’s award-winning social and copy trading platforms to learn investment techniques from other global investors
- High minimum amount of £200 is required to copy a trader’s position
- High investment fees
2. Plus500
Plus500 exposes traders to a user-friendly proprietary CFD trading platform that connects you to shares, indices, and ETF assets. You can also invest in commodities, forex at no commission. Investors will only pay low spreads, fees for overnight funding, and currency conversion. There are no transactions, managing, or rolling your position charges.
Plus500’s low charges make it an excellent option for low-budget traders. However, you must be an active investor since there is an inactivity fee should your investment account remain inactive for more than three months. Like eToro, Plus500 has a Trading Academy to help you sharpen your skills through eBooks, videos, and FAQs.
✔ Regulated in many countries
- Plus500 offers over 2,000 assets to invest in, allowing users to diversify their portfolios and potentially increase their profits
- Zero commissions and low spreads for investing
- Highly-rated mobile app for managing your investment on the go
- Only CFD assets are featured. You cannot buy and take full ownership of an asset at Plus500
- You have to be an active investor to enjoy your experience since the broker’s inactivity fees kick in after only three months of not logging into your account
Note: 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
3. IG Markets
Although IG Markets is highly recommended for professional investors in the UK, newbies with advanced skills can invest using it. This broker hosts a wide range of assets, including shares, indices, bonds, ETFs, etc. Unfortunately, IG Markets charges high fees for these CFD assets, so ensure you understand your budget and are confident in your skills before making a commitment.
IG Markets hosts plenty of learning resources on its IG Academy platform to easily sharpen your skills while exploring advanced features. Like eToro, the broker also features a social trading platform to interact with other traders. It is an excellent choice, and you can improve your success chances with its advanced research materials. Simply figure out whether it suits your investment requirements.
✔ Leading broker with low fees
- A gazillion investment assets, including shares, mutual funds, bonds, and ETFs, for newbies to explore
- Has an IG Academy platform hosting plenty of learning resources to boost your investment skills
- Various platforms to choose from, including ProRealTime, L-2 Dealer, and MT4
- ProRealTime and L-2 Dealer platforms are only accessible via desktop. No mobile accessibility
- You can only invest in IG Markets’ assets as CFDs
Read also the IronFX broker review in our other article.
How to Start Investing in the UK
Before investing in the UK, have investment goals and choose your preferred strategy. Furthermore, understand the amount of risk that comes with an investment and ensure you take measures to curtail the risks for maximum potential. Below are investing tips for beginners you should know.
- Learning the Market
Knowledge is paramount to an investment’s success, and you should start by learning how a market you want to invest in operates. For instance, if you want to venture into stocks, note that there are plenty of them with fluctuating prices. Learn how to analyse their price trends to develop solid strategies.
Fortunately, most investment brokers in the UK support investors with learning resources to develop their skills before trying to invest. they also have demo accounts that you should take advantage of and gauge your skill level. Also, there are a lot of books on trading to learn how to trade and when is better to start. In addition, you also need an equipment like a computer for trading, mobile device, and a stable internet connection.
- Budget
Once you feel confident to invest in the live market, have a budget and ensure you stick to it throughout your investment period. You see, the financial market is volatile, and you cannot be certain which direction an asset’s price will go. This means that while you can make profits in an investment, losses are inevitable. You do not want to go through emotional trauma after a loss simply because you invested a lot of money. Simply put, the money you invest should be one you are comfortable losing.
- Choose an Investment Broker
An investment broker in the UK must align with your requirements. These requirements include fitting in your budget, adhering to the FCA’s stringent regulations, having reliable support service, and being highly recommended by users on Google Play, Trustpilot, and the App Store. Additionally, the broker should host your preferred investment asset and support you with adequate resources for maximum experience.
We recommend the best investment brokers for beginners in the UK in the mini-reviews above. However, if you find them unsuitable, conduct thorough research and find the best.
- Make a Deposit and Understand Your Investment Option
As mentioned earlier, choose a broker you can afford by considering the minimum deposit requirement, trading fees, transaction costs, etc. Then, make the required deposit to access the available investment asset. Once your broker confirms the deposit, choose your preferred investment security and understand your investment option. Whether you want to invest in an asset’s stock, trade it as CFDs, mutual funds, ETFs, or indices, ensure you develop a solid strategy aligning with your investment option.
- Open a Position
You can decide to take a long-term or short-term position depending on your investment goals. Once you open a position, always monitor it to identify trends that could harm your investment. Note that our referenced investment brokers above have trading apps you can install on your mobile devices to track your positions on the go.
Since the stock market is volatile, always apply risk management controls like stop-loss orders that limit the amount of losses to incur and take-profit orders that closes a position once an asset’s price rises to a certain limit. Most importantly, have a trading journal to note down all your investment strategies. This is so that it will be easier for you to identify areas you fall short in and make amends to maximise your potential.
Note that the federal government requires UK investors to pay taxes on profits made through investing in the financial market. Therefore, understand your tax liability when calculating profits to earn in an investment.
Alternative Investments
While we recommend the best investment options for beginners in the UK, understand that there are other alternative investments you may wish to try at some point. They include commodities, hedge funds, real estate, foreign exchange, futures, etc. We advise you to try these investments once you are fully familiar with the world of investing. This is because some of these investments tend to be less liquid than traditional asset classes like stocks.
FAQs
Learning how to invest is easy since the majority of investment brokers host learning resources to help you advance your skills. On the brokers, you will find articles, guides, webinars, seminars, etc. You can also learn from website blogs and listen to podcasts and youtube channels.
To ensure you are improving on your investment skills, test yourself on a broker’s demo account. You must sign up for an investment account to access the demo. Also, start investing with small amounts of money and slowly add to your capital as you become more familiar with the investment market.
There is no specific amount of money needed to start investing unless a broker has a minimum amount required for investing. Therefore with as little as £50, you can invest in the share market since most brokers allow fractional purchases. All in all, have a budget and find an investment broker that fits it. The broker should also host your preferred investment asset and allow you to invest using multiple methods.
A mutual fund is a conventional investment vehicle consisting of various asset portfolios, including stocks, bonds, etc. Mutual funds are overseen by an investment manager and are less risky considering that they host various assets. On the other hand, an index is an investment basket consisting of various stocks. It is a measurement of a section of a stock’s value, and they include FTSE 100, S&P 500, etc.
Absolutely. Beginner investors can invest in US stocks using an investment broker with access to the exchanges where the stocks are listed. You can also trade the stocks as derivatives by predicting their price movements and earning from the difference. Simply ensure the broker also meets your investment requirements for a worthwhile experience.
Yes. Most investment brokers in the UK, like the ones we recommend on this page, have trading apps you can easily download from Google Play and the App Store. Mobile apps allow you to easily track your position whenever you step away from your trading station, meaning you still need your desktop for thorough research and strategy development.
Conclusion
Beginners in the UK should not fret about getting started with investment since there are plenty of learning resources to take advantage of. With our ultimate beginner’s guide to the stock market, we hope you will be able to find the best investment broker. Most importantly, select an investment asset you are familiar with and conduct a thorough market analysis for the best investment strategies.
While there is a fundamental analysis for strategy development based on economic data and reports, most short-term investors prefer to rely on technical analysis. A technical analysis evaluates an investment asset using charts to identify trends and patterns. Overall, it is best to combine technical and fundamental analysis in your research for the best investment decisions. Also, speak to a financial advisor for more guidance on how to invest in the UK.
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25,000 hours of testing 70+ brokers. Our recommended broker is Pepperstone.
Our recommended broker is Pepperstone.