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Investing for beginners

You don’t need to be an expert (or wealthy) to start investing. It could be easier than you might think.

What is investing?

Investing is when you set money aside for the future and put it to work for you. When you invest, you’re buying into something you believe will increase in value over time.

Remember – there are no guarantees, which means you could get back less than you invest. Your money could potentially grow too of course – that’s why people do it.

The key thing is to make sure you have some money saved up before you start investing. We recommend having an emergency fund to cover 3 to 6 months' worth of living expenses.

An emergency fund can give you peace of mind that you’d have some money available for the unexpected, without needing to dip into your investment fund.

The value of investments can, and do, jump around – this is normal. Investing should be seen as a medium to long-term commitment, which means you should be prepared to invest for at least 5 years. This could give you a chance to ride out any short-term fluctuations. However, you can access the money if you need to.

How much do you need to start investing?

If you have an HSBC current account or eligible savings account, you can start investing with a lump sum of £50.

Starting small could be a good way to dip your toe in the water. Then you can watch what happens to your investment – and invest more later if you want to.

What are the common ways to invest?

There’s no shortage of options of what you can invest in, but there’s also no need to be overwhelmed.

To help you get started, let’s focus on 2 common ways to invest: 

  • Shares
  • Funds

What are shares?

When you buy shares, you’re effectively buying a small stake in a company.

Companies sell shares to raise money, which they then use to expand their business. Investors (known as shareholders) are then free to buy and sell some (or all) of those shares on the stock market at any time.

If the company performs well (or is expected to), demand for its shares will generally increase – pushing its share price up.

If the company does badly (or is expected to), its share price will generally drop. Interest rates and the wider economy can also have an impact on share prices.

As a shareholder, the value of your investment rises and falls with the share price. While the money you invest has the potential to grow, it could also fall in value, so you may get back less than you invest.

What is a fund?

When you invest in funds, you’re buying a mix of investments, so you’re not putting all your eggs into one basket.

If some of the investments in the fund perform badly over a certain period, others may perform well. Helping to spread your risk is known as diversification. 

There are many types of funds on offer, but an especially diverse option is a ready-made portfolio. This is a collection of investments, typically made up of shares, government bonds, property as well as other funds – often from different regions around the world.

HSBC’s ready-made portfolios are managed on your behalf at a level of risk you feel comfortable with. They are run by a professional fund manager who chooses which global investments to hold and monitors them on your behalf. 

What about a stocks & shares ISA?

A stocks & shares ISA is not a type of investment. It’s an account you can choose to hold your funds or shares to make them tax-efficient.

This means you won’t pay any UK income tax or capital gains tax on the returns you receive, although there is a limit to how much you can put into an ISA each tax year.

As with all things tax-related, the value of the benefits to you will depend on your circumstances, and tax rules can change in the future.

Explore: What is a stocks & shares ISA?

Are there any fees or costs?

If you choose to invest, any costs will be signposted by the investment provider in the relevant product documents before you apply. It’s important to read these carefully before you invest – and to factor the fees in, as they will impact your overall returns.

Here are some common fees you may come across:

Trading or transaction fee

If you're investing in shares, you normally pay a fee every time you buy or sell them.

Account or platform fee

The cost a provider will charge to look after your funds or shares, giving you access to the tools and resources on their investment platform.

Ongoing or annual management charge

If you're investing in funds, this can be a useful comparison tool as it gives you a breakdown of the charges that are deducted directly from the fund, including the fund managers' annual management charge and other expenses.

Advice fee

This is the cost of receiving a personalised recommendation based on your circumstances. If you choose your own investments, you won't pay any advice fee.

How do you actually start investing?

You can invest with us online or via the mobile app. 

You need to have an HSBC current account or savings account (excludes Online Bonus Saver and Fixed Rate Saver). You also need to be registered for online banking and a UK resident aged at least 18 years old. Fees apply.

HSBC’s ready-made portfolios are an easy way to start investing. These are funds with a mix of investments that are managed on your behalf. Just choose your preferred level of risk, and we’ll take care of the rest.

Takeaway investing tips for beginners

  1. Save up an emergency fund of 3 to 6 months’ worth of living costs before you invest.
  2. Be prepared not to touch your investment for at least 5 years.
  3. Don’t assume you need to pick your own shares – ready-made portfolios are available.
  4. Use your ISA allowance when you invest to protect more of your money from tax.
  5. Consider starting small and watching to see what happens.

Guide to investment goals

Discover how to create, track, and manage your investment goals in the app. Remember – the value of your investments can go up and down and you could get back less than you invest. Eligibility criteria & fees apply.

This article was last updated: 17/05/2024, 04:59