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Investing for beginners

Time to read: 8 minutes

Before you invest your money, it's important to invest some time into learning the basics and understanding the risks.

With that in mind, we’ve demystified the jargon and unpicked the detail to bring you a guide that can help you navigate this exciting new world.


What exactly is investing?

Investing is a way of setting aside some of your money for the future by putting it to work for you. When you invest, you’re buying something that you believe will increase in value over time. The main thing you need to remember is there are no guarantees. The value of any investment can and will jump around so you could get back less than you invest.

What can you invest in? Well, from the more common types of investments – such as gold, bonds or shares, to the more unusual – such as coins, comics or cryptocurrencies, the answer is almost anything.

Rather than baffling you by describing the entire investment universe, let’s focus on the 2 most well-known ways to invest: shares and funds.

When you buy shares, you’re buying a tiny stake in a company. If the company performs well, you earn a profit. If the company does badly, your investment may not grow and you could even lose the money you invest. Share prices can also be affected by other factors, such as supply and demand, interest rates and the wider economy.

When you buy funds, you’re buying into a ready-made basket of investments. Some funds are even managed for you by an investment professional. Funds include many different investments rather than just one, which is why many people start by investing in funds.


What could an investment do for me?

By investing in the stock market, you get access to a diverse range of assets, such as shares, bonds and funds. The diversity is what gives your money the potential to generate a better return than cash in the long run.

So one of the first decisions you’ll need make is how you want to receive this potential return – whether via an income, capital growth or a combination of growth.

Investing for income could be a good shorter-term strategy if you’re nearing or in retirement. By choosing shares or funds that pay dividends or bonds that pay interest, you can receive regular payments to boost your existing income or pension.

Investing for growth could be good if you have more time on your side to grow your money. Growth investments aim to increase the value of the actual investment – known as capital gain. The objective of a growth fund would be to grow the original sum invested. For a growth share, it would be to increase the value of the share.


How much risk should I take?

Some people are naturally more cautious than others. The first thing you need to understand is that no investment is risk-free. You’re putting your money into something you believe will go up in value but there are no guarantees.

You’ll be exposed to the uncertainties of the markets, which means the value of your investment can and will jump around so you could get back less than you put in.  Your expected returns can also fluctuate. This is all normal and to be expected. With investing, risk and reward go hand in hand

As a general rule of thumb, higher-risk investments have the potential to give you higher rewards while lower-risk investments tend to equal lower rewards. What’s important is to ask yourself: how do I feel about taking a risk with my money?

Taking a small amount of risk could be a good way to dip your toe in the water. Then you can watch what happens to your investment – and increase your level of risk later if you want to.

And if you’re not sure about how much risk is right for you, you might want to consider getting personalised investment advice.

Our investment advice doesn’t just tell you how much risk you’d be comfortable with. It also tells you whether you should be investing at all right now – and if so, you how much you can afford to invest. Our advice involves a one-off advice fee and financial eligibility criteria apply.


Can I access my money if I need to?

Big things in life can, and do, happen out of the blue. We understand that. With any HSBC investment, you have peace of mind knowing that you can access your money quickly if you need to – usually within 2 to 3 days of selling your funds or shares.

However, investments have a better chance of producing favourable returns the longer they are left to grow. That’s why, you should think of investing as long-term commitment and aim to invest for at least 5 years.


Is now a good time for me to invest?

That’s a great question to ask yourself. To help you work out if you can afford to leave your money to grow, it can help to create your own financial action plan. If there are 4 clear steps to a better financial future, which step are you on right now?

Another thing to think about is whether you have any short-term, interest-bearing debts such as loans and credit cards. If so, it’s usually best to pay off your debts first before you start investing.

And we always recommend that you've built up a rainy day fund of between 3 and 6 months’ worth of expenses saved up before you make an investment. This gives you a financial cushion in case there’s an emergency so you should be able to leave your investment untouched and give it the time it needs to grow.

Again, if you’re really not sure, investment advice could help you make up your mind about investing. We’ll ask you about your finances and explore your attitude to risk so we can advise you on whether now’s a good time for you to invest. That way you’ll be in a great position to decide.

What’s the best way to get started?

So you’ve carefully assessed your situation and decided investing might be right for you. Now what?

A common way to start is via a stocks & shares ISA. This is because you won’t pay any UK income tax or capital gains tax on the returns you receive. As with all things tax-related, bear in mind that the value of the benefits to you will depend on your circumstances, and that tax rules could change in the future.

To invest via a stocks & shares ISA, you choose the type of investment you’d like to put your money into, then you place that investment in a stocks & shares ISA ‘wrapper’. This is simply a type of account that protects your investments from the taxes mentioned above.

Depending on how confident you’re feeling, you can either choose your own investments, or start your journey by getting some professional advice.

To invest with HSBC, you need to be a current account customer, a UK resident and over 18 years old. See which of our 4 investing options suits you best:


Want to choose your own shares?

If you’ve done your research and know what individual shares you’re interested in, InvestDirect could be for you. Our online sharedealing service lets you research and buy shares – of any amount, set up share price alerts and test your trading strategies in a virtual portfolio.


Interested in shopping from a range of funds?

If you think funds are the way to go, our online fund platform puts a wide range of funds at your fingertips. Global Investment Centre could be a great way to find your feet because you can start small with just £100 and see how you go. If and when you’re ready, you can invest a bit more.


Want a ready-made HSBC portfolio?

For a quick and easy way to start investing via our Global Investment Centre, you could choose one of our HSBC Global Strategy Portfolios. A suite of 5 multi-asset funds, they each invest in UK and overseas investments. All you have to do is choose the one that meets your preferred level of risk.


Bamboozled by the possibilities and want some advice?

If you’re not sure where to start, HSBC My Investment gives you personalised online advice with no obligation to invest. Answer a series of questions and we’ll advise whether investing is right for you and if so, which HSBC fund matches your needs. You can start investing with as little as £50 per month  – and you’ll only pay a fee if you follow our advice.


Your beginner’s guide takeaway

A round up of 5 key things to remember

  1. Save up an emergency fund of 3 to 6-months’ worth of living costs before you invest
  2. Think about starting small and watching your investment to see how it goes
  3. If you use your ISA allowance to invest, you’ll protect more of your money from tax
  4. Be prepared not to touch your investment for at least 5 years
  5. Consider taking advice to help you decide on what’s right for you

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