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How to Invest in ETFs UK for Beginners

Tobi Opeyemi Amure
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How to invest in ETFs UK

In a nutshell, to invest in ETFs in the UK, start by opening an account with a reputable online brokerage or investment platform that offers a wide range of ETFs. Once your account is funded, research and choose ETFs that align with your investment goals, considering factors like sector focus, performance history, and expense ratios. You can then buy and manage your chosen ETFs through the platform, keeping in mind diversification and long-term investment strategies.

Learning how to invest in ETFs in the UK can be a daunting task for beginners, so I’ve compiled key insights and practical steps to simplify the process.

This guide will empower you with the knowledge to confidently select and manage ETF investments in the UK market

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

Quick Steps to Invest in ETFs in the UK

Here’s a quick step-by-step guide on investing in ETFs:

  1. Identify desired ETFs: Begin by selecting the ETFs you’re interested in, keeping in mind that not every platform may offer them. This selection will help you focus on platforms that cater to your investment choices.
  2. Set up a share dealing account: Choose a suitable investing platform and prepare to open an account, ensuring you have your personal details, identification, and National Insurance number available.
  3. Deposit funds into your account: After establishing your account, proceed to add funds, typically through options like bank transfer or using a debit card.
  4. Decide your investment amount: Now that your account is active and funded, decide the specific amount you wish to invest in your chosen ETF.
  5. Make the ETF purchase: Finalise your investment by purchasing the ETF – a straightforward process that can usually be completed with a simple ‘buy’ action.

How to Invest in ETFs UK – Step-By-Step Guide

Here’s a more comprehensive outline of the steps for investing in ETFs in the UK.

1. Understand What an ETF Is

An Exchange Traded Fund (ETF) is a type of investment fund and exchange-traded product, with shares that are tradeable on a stock exchange. ETFs hold assets such as stocks, commodities, or bonds, and their primary advantage is that they combine the diversification benefits of mutual funds with the ease of trading a single stock.

2. Determine Your Investment Goals

Before diving in, ascertain whether you’re investing for long-term growth, income, or a combination of both. Different ETFs cater to different needs, be it sector-specific, international exposure, dividend-paying, and more.

3. Research ETFs

  • Expense Ratio: This is the annual fee that all funds or ETFs charge their shareholders. Look for ETFs with a low expense ratio.
  • Liquidity: Ensure the ETF has adequate daily volume. This makes it easier to buy or sell positions.
  • Underlying Assets: Look into what assets the ETF is holding – whether it’s stocks, bonds, commodities, etc.

4. Open a Brokerage Account

In the UK, you’ll need a stock brokerage account to invest in ETFs. Platforms like Hargreaves Lansdown, interactive investor, or AJ Bell Youinvest are popular choices.

When selecting a platform, consider factors like trading fees, account maintenance charges, and the platform’s user interface.

For more help, read my complete guide on the best ETF platforms in the UK.

5. Diversify Your Portfolio

Rather than putting all your funds into one ETF, consider spreading your investment across various ETFs to reduce risk. For instance, a mix of sector ETFs, international ETFs, and bond ETFs can offer a balanced portfolio.

6. Purchase Your Chosen ETFs

Once you’ve identified which ETFs align with your goals and you’ve funded your brokerage account, it’s time to make the purchase. Use the platform’s search feature to find your chosen ETF, decide the number of shares you want, and then execute the trade.

7. Monitor & Rebalance Regularly

The market’s dynamics can change, and as they do, your portfolio’s asset allocation might drift from your target. Periodically review and, if necessary, rebalance your portfolio to ensure it aligns with your initial investment goals.

8. Stay Informed

ETFs, like all investments, aren’t set-it-and-forget-it. Stay updated with market news, understand global events that could impact your investments, and keep an eye on performance metrics.

9. Consider Dividend Reinvestment

Some platforms offer a Dividend Reinvestment Plan (DRIP). If your ETFs pay dividends, instead of taking them as cash, you can choose to reinvest them to purchase more shares, thus compounding your returns over time.

10. Seek Expert Advice When Needed

If you’re unsure about any aspect of your investment journey, don’t hesitate to consult a financial advisor. They can offer personalised advice tailored to your financial situation and goals.

By following these steps, you’ll be better positioned to navigate the world of ETF investing in the UK with confidence and clarity.

Always remember, that while ETFs offer diversification, all investments carry risks.

It’s essential to invest in what aligns with your risk tolerance and long-term objectives.

What Is an Exchange-Traded Fund?

An Exchange-Traded Fund (ETF) is a type of investment fund that holds a diversified collection of assets, such as stocks, bonds, or commodities, and trades on a stock exchange similar to individual stocks.

This means that, throughout the trading day, investors can buy and sell ETF shares on public stock exchanges at market prices.

The primary advantage of ETFs is that they provide the diversification benefits associated with mutual funds, but they can be traded with the ease and flexibility of individual stocks.

Additionally, they often come with lower expense ratios compared to traditional mutual funds, making them a cost-effective choice for many investors.

How Do ETFs Work?

ETFs operate on the principle of pooling together investments from numerous investors to purchase a diversified portfolio of assets. Once created, this pool is split into shares that are listed and traded on stock exchanges, just like individual stocks.

The ETF’s value is derived from the net asset value of the underlying assets it represents. As investors buy and sell these shares on the open market, the price can fluctuate throughout the trading day based on supply, demand, and the changing value of its underlying assets.

However, a unique mechanism involving “authorised participants” ensures that the ETF’s market price stays closely aligned with its net asset value.

These participants can create or redeem “creation units” of the ETF, which are large blocks of its shares, to arbitrage any significant price discrepancies, thus keeping the ETF’s price in line with its actual asset value.

How to Choose an ETF?

Choosing an ETF (Exchange-Traded Fund) involves several key steps:

  1. Determine Your Investment Goals: Consider what you want to achieve with your investment – whether it’s long-term growth, income, or hedging against market volatility. This will guide the type of ETF you select, such as growth, dividend, sector-specific, or broad-market ETFs.
  2. Assess Risk Tolerance: Evaluate your comfort level with market fluctuations. Higher-risk ETFs, like those focusing on a specific sector or emerging markets, can offer higher returns but with more volatility. Conversely, broad-market or bond ETFs might provide more stability.
  3. Research Market Sectors and Themes: If you have a particular interest or believe in the growth potential of certain sectors (like technology, healthcare, or renewable energy), look for ETFs that focus on these areas.
  4. Check the ETF’s Performance History: While past performance isn’t an indicator of future results, it can provide insight into how the fund has managed under various market conditions.
  5. Understand the Expense Ratio and Fees: The expense ratio is the annual fee that the fund charges. A lower expense ratio is generally preferable as it reduces the cost of the investment over time.
  6. Look at the Fund Size and Liquidity: Larger funds generally have more liquidity, making it easier to buy and sell shares. Smaller funds may offer niche opportunities but can come with higher trading costs and risks.
  7. Review the ETF Holdings: Understand what assets the ETF holds. This information is crucial to ensure the fund aligns with your investment strategy and diversification goals.
  8. Consider Dividend Yields: If income is a goal, check the dividend yield of the ETF. However, remember that high yields can sometimes signal higher risks.
  9. Evaluate the Fund Provider: Choose ETFs from reputable providers known for their stability, transparency, and customer support.
  10. Use Screening Tools: Many investment platforms offer ETF screening tools that help filter ETFs based on your criteria like performance, sector, fees, etc.

Advantages & Disadvantages of Buying ETFs

Here are some of the advantages and disadvantages of purchasing ETFs.

Advantages of Buying ETFs:

  • Diversification: One ETF can provide exposure to a group of equities, bonds, commodities, or a mix, thus spreading risk across numerous assets.
  • Liquidity: ETFs are traded on stock exchanges, which means they can be bought and sold throughout the trading day at market prices.
  • Cost-Effective: Many ETFs typically have lower expense ratios compared to traditional mutual funds. Additionally, because they trade like stocks, investors can employ strategic trading tactics, like using stop orders.
  • Transparency: Most ETFs disclose their holdings daily, so investors always know what assets they own.
  • Tax Efficiency: The unique structure of ETFs often allows investors to avoid triggering capital gains taxes when switching holdings.

Disadvantages of Buying ETFs:

  • Trading Costs: While the expense ratio might be low, frequent trading can lead to commissions and costs, especially if not using a commission-free platform.
  • Price vs. Value: The traded price of an ETF might deviate from its net asset value (NAV). This means an ETF might sometimes be bought or sold at a premium or discount to its actual worth.
  • Dividend Issues: Dividends are typically accumulated and paid out periodically, which might not suit those who prefer regular income distributions.
  • Leveraged and Inverse ETFs: Some ETFs are designed to amplify returns using financial derivatives, leading to increased risks. They may not be suitable for all investors.
  • Underperformance: Not all ETFs successfully track their underlying index, leading to tracking errors. This discrepancy can result in returns that don’t precisely mimic the intended index.

Final Thoughts

Investing in ETFs within the UK offers a diversified approach to the stock market, making it appealing for both novices and seasoned investors alike.

With the ease of access through various online platforms and the wide range of ETFs available, individuals can tailor their investments to meet their risk tolerance and financial goals.

As with any investment, it’s crucial to conduct thorough research, understand the associated fees, and continuously monitor your portfolio to ensure it aligns with your long-term objectives.


Are ETFs beginner-friendly?

Yes, ETFs are considered beginner-friendly investments due to their simplicity, low cost, and inherent diversification. They allow new investors to gain exposure to a wide range of assets with a single purchase, reducing the risk compared to investing in individual stocks. Additionally, many ETFs are passively managed, which means lower fees and less need for active decision-making.

Where to invest in ETFs UK?

In the UK, investors can easily access ETFs through online stock brokers like Hargreaves Lansdown, interactive investor, and AJ Bell Youinvest. Additionally, robo-advisors such as Nutmeg and Wealthsimple offer curated portfolios predominantly based on ETFs. Traditional banks, including Barclays and HSBC, also provide platforms for investing in ETFs. Before choosing, it’s essential to consider the platform’s fees, ETF selection, and user experience.

How do beginners buy ETFs?

Beginners can buy ETFs by first opening an account with an online brokerage that offers a wide selection of ETFs. After funding the account, they can research and select ETFs that align with their investment goals, considering factors like the sector, performance, and expense ratios. The purchase can be made directly through the brokerage’s platform, with the option to start with small investments and gradually diversify the portfolio.

What is the best ETF for beginners in the UK?

The best ETF for beginners in the UK often includes those that track major indices like the FTSE 100 or the S&P 500, such as the iShares Core FTSE 100 UCITS ETF or Vanguard S&P 500 ETF. These ETFs offer diversification, lower risk due to their broad market exposure, and are typically associated with lower fees, making them suitable for novice investors. However, the ideal choice depends on individual investment goals, risk tolerance, and the desired market focus.

Can I buy an ETF without a broker?

No, you typically cannot buy an ETF without a broker as ETFs are traded on stock exchanges similar to individual stocks. To invest in ETFs, you need to open an account with a brokerage or an investment platform that provides access to the stock market. These platforms enable you to buy and sell ETFs just like stocks.

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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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