Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest

It’s a thought that has crossed many people’s minds at one point or another: I should probably start investing. You may even have begun setting aside a little money strictly for that purpose. Perhaps you’ve gone so far as to pencil in a Sunday to get yourself all set up.

But when that Sunday eventually dawns and you’ve sat yourself down at your laptop with all the right intentions, the tricky part is knowing what to do next.

Don’t worry, that feeling’s normal. It’s all well and good deciding to invest, it’s quite another to go ahead and do it.

Fortunately, the beginning is the hardest part. Once you know how to get started, everything else should seem a whole lot more manageable.

Opening an ISA

The first item to tick off is opening an investment account. If you’re looking to invest for anything other than your retirement, it makes sense to keep your investments in a Stocks and Shares ISA.

An ISA, or Individual Savings Account, allows you to keep money in cash or invested in assets like shares and bonds without having to worry about tax on the gains that might otherwise apply. You can stash away as much as £20,000 each tax year this way and you can access the money whenever you like. If you’re looking to the long-term, investing your money can lead to a higher return - and a larger pot - than saving inside a cash account. This is of course not guaranteed and your money can also go down.

Introduction to funds

Once you’ve opened your ISA, the next decision to make is where you want to invest your money.

This part probably feels the most intimidating. There are thousands of different companies and asset classes and geographies where you can hold your money. How do you know which is best for you?

Fortunately, investing now isn’t anywhere near as complicated as it used to be. Really, investing has to be simple, or else no one would do it.

Investment ‘funds’ are designed with that in mind, making it easy for private investors like you and me to get in on the action.

Funds allow investors to pool their money together, which a fund manager will then invest on their behalf. These managers do all the hard work for you. They’re the ones who pick what companies to invest in, which markets present the best opportunities, and do all the buying and selling in the background on your behalf.

Different funds have different strategies which may focus on assets like shares and bonds (you can find out more about those here), but for the most part managers will diversify their fund over a range of investments. Doing so means they don’t become overly reliant on the fortunes of a small number of holdings - were one to perform poorly, its impact should hopefully be mitigated by the performance of others.

Simpler than you feared, right? All you need to do is pick a fund.

Ok, you might be thinking, but haven’t we just shifted the problem? Now, instead of picking between the thousands of different assets out there, don’t I need to pick between the thousands of different funds?

Here too, investing has evolved to make the process simpler than you’d first think. Fund ‘supermarkets’ are designed to make it as easy as possible to choose which best suit your needs.

Lost in the supermarket

Trying to make sense of the plethora of options available can at first seem overwhelming - but so too can a quick shop at Tesco. We’ve all walked into the local supermarket looking for a jar of mayonnaise and wondered how on earth we’ll find it amid all the meal deals and arguing families that block the way.

A good supermarket lays out its produce in such a way to make it as easy as possible for shoppers to find what they’re after.

Fund platforms use the same logic. If you know what you want, you can use tools like Fidelity’s Investment Finder to find exactly what you’re looking for. If you’re not so sure - perhaps you’re in the mood for a salad, but you’re not quite decided on which ingredients would work best - then you can explore our experts’ Select 50 choice of favourite investments to help you narrow down the options. And if you really have no idea, our Navigator tool suggests funds based around your investment objectives.

Adding to your basket

Ok, you’ve made good use of the supermarket’s resources and you’ve found the coveted mayo. But, approaching the counter, prize in hand, you remember that mayonnaise on its own actually isn’t that special. Mayonnaise (at least in my opinion) is best enjoyed when it’s served alongside something else.

Funds are no different. Investing in one fund is a good start, but often it’s best to spread your money over a number of different funds in order to build up a personal portfolio. The logic here is similar to that of fund managers who diversify over a variety of investments - holding several funds means you’re not overly reliant on any one’s performance.

Building up your own portfolio also offers you the flexibility to manage your investments over time. You can add to strong performers, remove weak ones, and adjust it as your objectives change.

It means you don’t have to put all your eggs in one basket. Or only eat mayonnaise.

View the Select 50

More on Navigator

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Select 50 and Navigator are not a personal recommendation to buy or sell a fund or particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

Topics covered

Active investing; DiversificationInvesting for capital growthISA

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