Investing. Clearly Explained.

Putting your money to work in the complicated world of investing. Here’s what you need to know.

What is investing and should you invest?

Did you know you have a £20,000 allowance to invest tax free each year? Rather than having your money sit in a bank account, you can put it to work and earn a return – and over the years end up with more money than you started with should all things go to plan.

It’s a complex world, and there’s a lot to learn, but you shouldn’t be deterred, it’s as safe or as risky as you like and it’s one of the best ways to secure your future. It’s tax free for a reason!

Types of investments

Investing comes in many forms, but the most common ways are to buy a portion of a company directly (shares), lend your money to a company or the Government (bonds), or put your money into a fund that would buy shares and bonds itself (most common).

Stock & shares

You can get involved in a business's growth and success by buying part of the business itself, called a share. These shares are traded all over the world on stock exchanges, and their value will go up and down depending on the performance of the company. Some large companies will also pay out part of the company's profits to all those who hold shares (shareholders), which are called dividends.

Bonds

You can effectively loan your money to a company or government and receive interest payments on the amount loaned. You do this by buying bonds. The bond will also have a date they mature, which is when the loan amount will be repaid. Not all companies issue bonds.

Funds

Funds are groups of investments, such as shares and bonds, and you buy a share of the fund itself. They can be managed by a person, known as a fund manager, or track selected companies, such as the biggest 100 companies in the UK (FTSE100). Some funds trade on stock exchanges, known as Exchange-Traded Funds (ETFs), just like company shares, and can be bought and sold whenever you like.

How to invest

There’s many ways to invest, but for the vast majority of us in the UK, it’s best to use a Stocks & Shares ISA, and then decide the method of investing, broadly split into 3 categories: ‘do-it-yourself’, ‘do-it-with-me’ and ‘do-it-for-me’ – all of which will have different providers and platforms where you can set up a Stocks & Shares ISA and begin investing.

Tip: to find out more about starting to invest or if you already have investments and want to know if they could do better, you can book a free investments check with an IFA here¹.

Stock & Shares ISA

Every adult in the UK has an allowance of £20,000 to be used for tax free savings and investments, that means you can put up to £20,000 into an Individual Savings Account - that’s either a Cash ISA, a Stocks & Shares ISA or a Lifetime ISA, or a mix of all, each tax year (April to March). Any interest received or increase in value of your investments, will be completely tax free.

Do-it-for-me investing platforms

If you just want to invest your money and not manage which shares and funds you want to buy, which is a lot of us, these platforms may suit better. You pick how much risk you are happy with then you can forget all about it, your investment will be managed by the platform and their experts. They’ll only be buying funds (ETFs), not company shares, and you’ll be paying a fee each year as a percentage of your investment. One of the most popular is nutmeg.

Do-it-with-me investing platforms

Still with full control over your investments, and which shares and funds you are buying, these platforms offer more support and assistance is deciding which funds might be better for you, offering portfolios of risk levels to decide from. One of the biggest is AJ Bell.

Do-it-yourself investing platforms

For those who know what they are doing, and have clear goals and understanding of shares and funds, along with how to manage an individual portfolio of investments. These platforms are relatively simple and just provide access to the shares and funds that you want to purchase, and normally for a lower fee. One of the most popular is Interactive Investor.

Using an adviser

We recommend that you speak to an adviser who specialises in investments using Unbiased.  

All the advisers at Unbiased are FCA regulated and independent of product provider so this means the IFA (Independent Financial adviser) is paid to work for you and to act solely in your best interests. The adviser will be experienced in identifying funds and comparing them objectively.

Quite simply, they know what to look for and what qualities and/or risks to be aware of. They won’t inevitably make the right call every time – but the odds of them picking good funds are very much better than the odds of anyone doing it by chance, or after a few hours of online research.

You simply talk to them about your investment needs and your ethical preferences, and the IFA goes away and finds suitable funds for you to choose from. The difference in returns between good and poor funds can be dramatic, which in many cases will more than justify the IFA’s fee, you can book a free investments check with an IFA here¹ to help ensure your investment experience run smoothly.