Sterling Savvy


6 Best Investments for Beginners

Tobi Opeyemi Amure
Reviewed by:
Best Investments for Beginners

Investing your money can seem intimidating, especially if you’re just starting out.

However, there are accessible options for beginner investors that can help grow your money over time without taking on too much risk.

The key is choosing investments that match your financial goals, time horizon, and risk tolerance.

These 6 options are some of the best investments for beginners to consider:

This article was reviewed by Tobi Opeyemi Amure, an investing expert and writer at, and

1. Mutual Funds

Mutual funds are professionally managed collections of stocks, bonds, and other securities. When you invest in a mutual fund, you’re buying shares of the overall portfolio. Mutual funds offer built-in diversification and take care of security selection and portfolio rebalancing for you.

One of the top benefits of mutual funds is affordability. The minimum initial investment is usually £500 or less, making mutual funds accessible for new investors. They also provide instant diversification. A single mutual fund may contain hundreds of underlying securities, allowing you to invest in many assets without needing a large amount of capital.

Mutual funds carry some risks, including lower potential returns than investing in individual securities directly. However, they are one of the simplest options for beginners. Good starter funds include index funds and target date funds.

How to Invest in Mutual Funds

Investing in mutual funds is straightforward:

  • Open an investment account. Choose a UK brokerage firm like Hargreaves Lansdown or AJ Bell Youinvest. You can open an Individual Savings Account (ISA) or a general investment account.
  • Compare funds and select one. Decide which mutual fund meets your sector, geographic, and risk preferences. Leading fund families like Vanguard and Fidelity offer diverse options.
  • Purchase fund shares. Input how much you want to invest and execute the trade through your brokerage account. Some platforms have minimums of £50 or £100 per fund.
  • Monitor performance. Review your fund periodically to ensure it’s still meeting your needs. Rebalance your portfolio as needed.

When choosing funds, consider the fees, past performance, holdings, and investment objectives. Index funds that track major market indexes are a smart initial pick.

Key Benefits

  • Affordable minimums (£500 or less)
  • Professional management
  • Instant diversification
  • Automatic rebalancing
  • Variety of fund types


  • Potential underperformance versus picking individual stocks
  • Less control over holdings
  • Ongoing fees reduce net returns

See also: How to invest in funds & How to invest in index funds

2. ETFs

Exchange-traded funds (ETFs) have grown increasingly popular in recent years. Like mutual funds, they contain a basket of investments to provide instant diversification. However, ETFs are traded on exchanges just like stocks. This provides added flexibility for trading and tax efficiency.

Many ETFs track stock indexes or benchmarks, such as the FTSE 100 or S&P 500. When you buy shares of an index ETF, you get exposure to the entire index in one purchase. This provides a simple way to invest in major asset classes and markets. Other ETFs track sectors, industries, or themes.

ETFs can have slightly lower expense ratios than comparable mutual funds. The minimum investment is the cost of a single share, making them attainable even for beginners with limited capital.

Just like mutual funds, ETFs do come with risks. The share price fluctuates throughout the trading day, and ETFs can trade at a premium or discount to the net asset value. However, they remain an accessible starting point for new investors.

How to Invest in ETFs

Investing in ETFs involves:

  • Choosing a brokerage. Look for a platform that offers commission-free ETF trades.
  • Researching your options. Compare ETFs by assets under management, expenses, holdings, tracking error, and past performance.
  • Placing a trade. Enter the fund ticker and number of shares to buy. You can trade throughout the day when the market is open.
  • Monitoring your investment. Check in periodically on the ETF’s performance compared to the benchmark it tracks. Rebalance as needed.

Leading ETF issuers include iShares, Vanguard, and Invesco. A core holding like VUSA or IUSA can provide exposure to the overall US stock market.

Key Benefits

  • Trade throughout the day like stocks
  • Low expense ratios
  • No minimum beyond the share price
  • Wide variety of ETF types
  • Can automate investing


  • Potential for premiums/discounts to net asset value
  • Requires more discipline for new investors
  • Harder to reinvest distributions

See also: How to invest in ETFs

3. Retirement Plans

Retirement plans allow you to save and invest for the future while receiving tax breaks. Even if retirement is decades away, it’s wise to start contributing early to benefit from compound growth. Retirement plans make the process automatic through payroll deductions.

In the UK, workplace pension schemes automatically enroll employees earning £10,000 or more. Your employer is legally required to contribute to your workplace pension as well. If you don’t have access to one through work, you can set up an individual retirement account like a personal pension.

The most common types of retirement plans in the UK include:

  • Workplace pension schemes – Auto-enrolled by employer if eligible. May include matching contributions.
  • SIPPs – Self-Invested Personal Pensions. Allow DIY investing with a wide range of assets.
  • Stakeholder pensions – Low-cost plans with capped fees. Minimum contributions are around £20 per month.

Retirement investing does involve risks like market fluctuations and keeping up with minimum contributions. However, taking advantage of tax-deferred growth in a pension can pay off tremendously down the road.

How to Invest in Retirement Plans

  • Enroll in your workplace pension through your employer if eligible. Take full advantage of any matching contributions.
  • Open a SIPP or stakeholder pension if you lack a workplace scheme. Choose a low-fee provider like AJ Bell or Hargreaves Lansdown.
  • Select investments. Mutual funds and ETFs are common choices. Follow a diversified, balanced asset allocation based on your timeline.
  • Make consistent contributions through payroll deductions or automatic bank withdrawals. Increase them over time as your income allows.
  • Review your holdings each year and rebalance if needed. Adjust your allocations as you get closer to retirement.

Starting early and making regular contributions are the keys to success. Even modest monthly amounts can grow significantly over decades of disciplined saving and compound returns.

Key Benefits

  • Automatic contributions from pay
  • Tax benefits
  • Employer match is free money
  • Low fees with group plans
  • Certain withdrawal exceptions


  • Locked away until age 55
  • Job change could limit future benefits
  • Requires discipline not to cash out when changing jobs

See also: How to start a pension

4. Individual Stocks

Purchasing shares of individual companies is how many people first imagine investing. Choosing your own stocks can seem like an exciting prospect. However, stock picking takes research and involves higher volatility. It’s best suited for more experienced investors.

That said, adding a few individual stocks can have a place in a balanced portfolio. Certain UK beginner investors may want to dip their toes in by buying shares of companies they know and understand. Just don’t go overboard.

Investing in individual stocks carries a higher risk than diversified funds. A single company’s performance can differ wildly from the overall market’s direction in a given year. Losing your entire investment in one stock is possible, although uncommon for large companies.

A better approach is choosing established, blue-chip companies across different industries. Look for firms with long track records of earnings and dividend growth. Investing in what you know also helps evaluate companies. Limit individual stocks to no more than 10% of your overall portfolio when starting out.

How to Invest in Stocks

  • Open a share dealing account with a UK brokerage firm. Look for low or zero trade commissions.
  • Research companies using annual reports, news, data on valuation and profitability ratios, and other public filings.
  • Start small. Invest a few hundred pounds per stock to minimise risk. Diversify across sectors.
  • Execute trades. Enter the stock ticker, number of shares, and order type like market or limit order.
  • Hold long-term and add to positions gradually over time. Collect dividends. Periodically reevaluate your picks.

Regular investing in an index fund should form the core of your portfolio. Carefully selected individual stocks can be sprinkled in from there.

Key Benefits

  • Wide range of UK stocks to choose from
  • Chance to outperform the broader market
  • Commission-free trading is widely available
  • Stocks and shares ISAs allow tax-free gains


  • Much higher risk than index funds
  • Individual companies can go bankrupt
  • Requires extensive research
  • Volatility can test your nerves as a beginner

See also: How to invest in stocks

5. Robo Advisor Accounts

For hands-off investing, robo-advisors have become popular in recent years. Robo advisors use computer algorithms to provide automated portfolio management aligned with your investing goals.

After answering questions about your risk tolerance and timeline, the robo-advisor builds and manages a diversified ETF portfolio on your behalf. This takes the work out of investment selection and rebalancing.

Robo advisor accounts tend to have low account minimums, making them accessible for beginners. Fees are usually around 0.5% or less, competitive with traditional adviser fees. Leading UK firms include Nutmeg, Wealthsimple, and Moneyfarm.

The algorithms can lack the nuance that a human adviser might provide. During periods of high volatility, significant drops can test your risk tolerance as well. However, robo-advisors offer a simple way to start investing with professional management.

How to Invest With a Robo Advisor

  • Answer questions about your goals, timeline, income, and risk tolerance to build your investment plan.
  • Link your bank account to fund your account and enable automatic deposits if desired.
  • Review your portfolio. The robo-advisor selects appropriate ETFs but you can provide input if desired.
  • Monitor your performance periodically. Revisit your risk profile if needed as life circumstances change.
  • Make regular contributions to steadily build your portfolio over time. Increase deposits when possible.

Robo advisors take the complexity out of investing your money. For hands-off beginners, they provide an affordable way to get started.

Key Benefits

  • Automated, algorithm-driven investing
  • Low account minimums
  • Competitive management fees
  • An excellent option for hands-off beginners
  • Easy to set up automatic contributions


  • Algorithms lack a human perspective
  • Untested during prolonged bear markets
  • Less customisation than traditional advisers
  • Limited phone/in-person support

6. Bonds or CDs

Investing doesn’t have to mean buying stocks if you want to minimise risk. Bonds and certificates of deposit (CDs) offer beginners steady returns through fixed-interest payments. Rates are lower than stock returns over the long run but more stable.

Bonds are debt instruments issued by governments and corporations to raise capital. When you buy a bond, you loan money to the issuer. In return, they make interest payments to you for a set period of time until the bond matures. Even if markets crash, bonds continue paying out at the fixed rate.

CDs are similar but issued by banks. The bank pays a guaranteed interest rate if you keep your money deposited for a set term, often 1-5 years. FSCS insurance covers up to £85,000 per person per institution. While rates are low now, CDs give beginners an ultra-safe way to earn modest returns.

Bonds and CDs provide regular income and stability. However, returns do not keep pace with inflation. They are unlikely to produce significant wealth over time but play an important role in balanced portfolios.

How to Invest in Bonds & CDs

  • Open a brokerage account or bank CD. Some banks allow purchasing CDs right on their website.
  • For bonds, research your options including government and corporate bonds across different maturities.
  • For CDs, compare rates across banks and credit unions. Shorter-term CDs pay less but offer more flexibility.
  • Purchase bonds or deposit money in your CD account. Minimums range from £100 to £10,000.
  • Hold bonds to maturity or until sold. Withdraw CD funds when the term ends. Roll over into a new CD or redeem your money.

Conservative investors who prioritise safety and predictable income over growth can build their portfolios around bonds and CDs. Just be mindful of inflation eating away long-term returns.


Key Benefits

  • Provides fixed, regular income through interest payments
  • Typically less volatile than stocks
  • Government bonds are considered extremely low risk
  • Can balance and diversify stock holdings
  • Wide variety of bond types with different maturities


  • Interest rate risk – rising rates reduce existing bond prices
  • Inflation erodes the purchasing power of fixed payments
  • Default risk with corporate bonds
  • Limited upside compared to stock returns
  • Can lose principal if sold before maturity


Key Benefits

  • FDIC insurance protects against losses up to £85,000
  • Guaranteed fixed return for the term of the CD
  • No market fluctuations or risk of losing money
  • Very low investment minimum


  • Interest rates are typically lower than bonds
  • Penalty for early withdrawal
  • Rate locked in even if market rates rise
  • No participation in stock market growth
  • Inflation can reduce real returns

Tips for Investing as a Beginner

Investing for the first time requires some preparation. Follow these tips to set yourself up for success as a beginning investor:

  • Set specific goals. Know what you’re investing for, like retirement, education, or a major purchase. Your goals determine your timeline and risk tolerance.
  • Pay off high-interest debt. Credit card balances and other high-interest debt hold you back from investing success. Pay these down aggressively before investing.
  • Build an emergency fund. Aim for 3-6 months of living expenses in cash savings before investing. This provides a cushion without needing to sell investments.
  • Educate yourself. Read investing books and blogs. Understand basics like diversification, index funds, asset allocation, and the historical returns of different asset classes.
  • Start small. Investing little by little helps overcome fear and build discipline. Dollar-cost average into the market with regular contributions, even if small at first.
  • Use tax-advantaged accounts. Take full advantage of workplace pensions, ISAs, and other tax-deferred or tax-free accounts for bigger long-term returns.
  • Reinvest dividends and gains. Let compounding work its magic by reinvesting all distributions instead of spending them. Dividend reinvestment plans (DRIPs) make it easy.
  • Automate processes. Set up automatic contributions from your paycheck or bank account. Autopilot investing helps stick to the plan.
  • Tune out short-term noise. Ignore daily market swings and news hype. Remain focused on the long term and don’t let emotions derail sound investing habits.
  • Review portfolio allocation yearly. Rebalance your portfolio to match your target asset allocation as needed. Adjust contributions to underweighted assets.
  • Don’t panic during downturns. Market corrections and bear markets are normal historically. Ride out short-term declines by staying invested. Add more on the way down.

Why Should You Start Investing?

Here are some of the top reasons to start investing:

  • Build wealth over time – Investing allows your money to grow through compounding returns. Even small, regular investments can grow substantially over decades.
  • Save for major goals – Invest for specific objectives like retirement, a house, college, or starting a business. Investing provides funds when you need them.
  • Beat inflation – Inflation erodes the purchasing power of cash savings. Investing in assets with growth potential counters inflation.
  • Earn passive income – Certain investments like dividend stocks pay out regular income. This provides cash flow without continuous work.
  • Take advantage of tax benefits – Accounts like ISAs and pensions provide tax relief on contributions, tax-deferred growth, and tax-free withdrawals.
  • Gain financial security – Building wealth through investing helps manage unforeseen expenses and job loss without straining your finances.

The sooner you start investing, the more time compound returns have to grow your money. Regular investing for the long term is key, even if you start with small amounts. Consistency and discipline pay off.

How Much Money Do You Need to Start Investing?

There is no specific minimum amount required to start investing. Here are some guidelines:

  • Investing even small sums like £25-50 per month in a stocks and shares ISA or self-invested personal pension (SIPP) can add up over time thanks to compounding returns.
  • Many mutual funds have minimums of £100 or £500. Exchange-traded funds (ETFs) can be purchased for the price of a single share, often less than £100.
  • With fractional share investing, you can invest in stocks with as little as £1. This allows easy diversification.
  • Robo-advisors like Nutmeg and Wealthify have account minimums starting from £1. This provides access to professionally managed portfolios.
  • While less capital is required to begin investing today thanks to fractional shares and low-minimum funds, ideally you should have:
    • 3-6 months’ worth of living expenses in an emergency fund
    • High-interest debt paid off
    • Some money left over to invest each month
  • The key is consistency. Make investing an ongoing habit. Small amounts invested regularly can grow significantly over 30+ years thanks to compound returns.
  • Automate deposits from your paycheck or bank account so you invest passively without manually contributing each month.
  • Increase your contributions over time as your income and savings grow. But start now, even if you can only invest small amounts initially.

The most important thing is to begin investing now instead of waiting. Time is your most powerful asset thanks to compounding.

Best Investments for Beginners – Final Thoughts

Investing as a beginner does not need to be difficult or expensive. Sticking to the basics, thinking long-term, and using time to your advantage are the keys to getting started on the right foot.

Mutual funds and ETFs offer the simplest, most affordable way to build a balanced, diversified portfolio. Retirement accounts like pensions allow tax-deferred growth through automatic contributions. For hands-off investing, robo-advisors provide algorithm-driven portfolio management. Bonds and CDs appeal to conservative investors who favor stability and income over maximising growth.

While investing in individual stocks may seem tempting, limit exposure and maintain a long-term mindset. Conduct ample due diligence, focus on blue chip companies, and resist daily market swings.

Make investing a habit by starting early and adding money consistently. Reinvest all dividends and capital gains. Increase contributions over time as earnings rise. Review your portfolio allocation each year and rebalance it as needed.

Exercise patience and persist through market turbulence by focusing on your long-term goals. Don’t let fear or greed steer you off course. By starting now and sticking to a plan, you can steadily build long-term wealth through investing.


*This is not financial advice.

Investments can fluctuate in value, possibly leading to a return less than the initial amount invested. Historical outcomes don’t guarantee future results.

Pensions are investments for the long haul. Their worth might vary, potentially affecting the pension benefits you receive. The income from your pension could be influenced by prevailing interest rates when you claim your benefits.

The content in this article is informational. Refrain from making decisions solely based on this information. Our comprehension of HMRC rules, as presented here, may change.

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Will Fenton is the founder of Sterling Savvy. He is a personal finance expert and writes about trading, investing, budgeting, and other financial topics.

Along with his education in Economics & Finance, he has experience working in the financial services industry in London working for one of the UK’s leading financial companies, “a trustworthy and respected provider of news, education and market analysis for the everyday investor”.

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