Investing for beginners – choosing your first investment

Choosing investments is one of three important steps to think about when becoming an investor.

Once you’ve decided on an investment platform and you’ve chosen an account, you’ll need to think about where to invest your money.

Here are some tips. But you’ll still need to do your own research too and decide what’s right for you, your needs and if it fits with your attitude to risk.

Remember, investing isn’t for everybody. Saving tends to be for the short term, while investing is for the longer term – by that, we mean at least five years.

Read more about the differences between saving and investing or watch our video to get to grips with the basics.

This article isn’t personal advice. If you’re not sure if an investment is right for you, ask for financial advice. Unlike the security offered by cash savings, investments fall as well as rise in value, so you could get back less than you put in.

How will you make your investment?

Before you choose your investments, it’s worth thinking about whether you want to invest regularly, or if you’d prefer to make a one-off investment.

It’s notoriously difficult to judge the best time to invest, so drip-feeding your money could be a sensible option.

Investing with a monthly direct debit is one way to do this. You can set one up to invest automatically with HL, from £25 per investment. But while this could take the emotion out of your decisions, you’ll need to check the charges and whether it’s an option for the investments you’ve picked.

More on investing by direct debit

What type of investment will you choose?

There’s plenty of choice when it comes to investing. For lots of beginners, this can be overwhelming.

To try and narrow down your options, you can learn about the different types of investment available. For example, two of the main ways to invest are in shares and funds.

• Shares – you’re buying a part of a company, in exchange for a share in how it performs. Shares trade live on a stock exchange, where different companies are bought and sold.
• Funds – individual investors give their money to a fund manager – who invests all the money, choosing investments on everyone’s behalf based on the fund’s objectives. They aim to grow the money over time, produce an income, or a combination of both. You’ll pay a fee to own a ‘unit’ in a fund, in exchange for the manager’s expertise and time spent looking after your money.

Funds offer more diversification than shares. We have a number of tools to help investors make their own decisions, like our Wealth Shortlist.

Here are two fund ideas from our fund research team.

2 investment ideas

Let the professionals do the hard work for you. Get instant diversification with a fund that includes different types of investments, like shares and bonds, and lets you invest in different parts of the world.

Mixed investment funds can be a good one-stop-shop for new or novice investors, or investors looking to outsource how much to put where. They usually blend shares and bonds, but the proportions are different for every fund.

They use a range of strategies, so some are more cautious or adventurous than others.

Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made.

Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.

Schroder Managed Balanced

Schroder Managed Balanced could make a great core fund for a long-term growth portfolio.

The managers mainly invest in funds run by other Schroder fund managers. This means there’s plenty of experience in the fund. Collectively, those managers invest in hundreds of different companies and bonds worldwide, so the portfolio offers lots of diversification.

Currently around two thirds of the fund invests in shares. The rest of the fund is a mix of different bonds, cash, as well as some alternative investments like commodities. These could perform differently from the shares portion and offer some resilience during more turbulent times for markets.

We think this fund could form the core of a broader portfolio aiming to deliver long-term growth, or add some stability to a portfolio mostly invested in shares.

The managers' freedom to invest in high-yield bonds and derivatives adds risk. This fund has a holding in Hargreaves Lansdown plc.

More about Schroder Managed Balanced, including charges

Schroder Managed Balanced key investor information

Pyrford Global Total Return

Pyrford Global Total Return could be of interest to more cautious portfolios. It mainly invests in a mix of shares and bonds, but tends to have less invested in shares, which could help reduce the ups and downs.

The fund aims to deliver a return ahead of inflation over the long term. While it won't shoot the lights out, the managers try to grow investors' wealth modestly over the long run, without all the significant ups and downs of investing everything in shares.

We think this makes it a great option for a more conservative portfolio, or a way to bring some stability to a broader investment portfolio. The managers can invest in companies across the globe, with the flexibility to invest in emerging markets, which if used increases risk.

This is an offshore fund, so you’re not normally entitled to compensation through the UK Financial Services Compensation Scheme.

More about Pyrford Global Total Return, including charges

Pyrford Global Total Return Key Investor Information

Useful resources

There’s always more you can learn as an investor. If you’d like to read more before deciding on your first investment, here are three pieces to help.

• Don’t put all your eggs in one basket

Learn more about diversification, and why it pays to be smartly spread.

Read now

• Understand investing behaviours

Why becoming a good investor takes time, patience and a strong mindset.

Read now

• How to build an investment portfolio

Creating a tailor-made portfolio can be a tricky art to master. We look at a strategy.

Read now