Barriers to first-time investing – and how to beat them!

Written by Lori Campbell on 27th Apr 2023

Doing anything for the first time can be daunting, and investing is no different. This is especially true in the current uncertain economic climate and cost-of-living crisis.

But it doesn’t have to be. Taking your first steps into investing really can bring you life-changing rewards over the long term. With the right investments, you can also make a meaningful positive impact on the planet and society too.

New research from sustainable investment specialists Liontrust and The Big Exchange – both Good With Money ‘Good Egg’ companies – reveals that savers are put off from investing by two perceived barriers: a lack of knowledge and not having enough money to invest.

So let’s tackle those.

Barrier 1: ‘I need to be an expert’

Comments from the research – where first-time investors with DIY platform The Big Exchange were asked why they hadn’t invested before – include “didn’t understand how,” “overwhelmed by the markets” and “I didn’t know how to get started.”

The reality

You don’t need to have a degree in finance to be literate when it comes to managing money. If you’re open to learning, you’ll soon discover that it isn’t as difficult as it’s been made out to be. The options – and jargon – in the investing industry can feel overwhelming but it really is easy enough to get started.

A good place to dip your toe into the stock market for the first time is with an investment platform that offers ready-made funds. Take a look at our top three easy-to-use sustainable investment platforms and top seven platforms for a green stocks and shares ISA.

You’ll notice some platforms offer actively-managed funds, while others take a passive approach.

With an actively-managed fund, a professional stock-picker will choose a selection of companies to invest in, pulling in new ones and throwing out poor performers as they see fit. For sustainable funds, they select companies that meet certain environmental, governance and social (ESG) standards, and filter out those that don’t.

With this approach, you pay a fee to the pro who’s managing your money and another to the platform.

You could also invest via an Exchange Traded Fund (ETF), which is where the fund tracks a particular stock market index, for example, the FTSE100. These are known as ‘passively’ managed funds and tend to have lower fees and charges than actively-managed funds, but potentially lower returns and positive impact. Apps offering investments in ETFs with sustainable themes include CIRCA5000 and Wombat Invest.

Always choose a fund that suits the level of risk you are comfortable with and check the fees and charges. Remember that investments can go down as well as up so never invest what you can’t afford to lose.

To make the most of tax relief, you’ll need to choose a ‘basket’ for your investments such as an ISA (this will suit most people starting out), Junior ISA, Lifetime ISA or Innovative Finance ISA. See more on this in our jargon-free guide The ABCs of ISAs.

The Good Guide to Financial Wellbeing for Women

Barrier 2: ‘I don’t have enough money’.

Comments from the research include a “lack of knowledge and belief that large sums of money were needed to get started,” and that they “didn’t have enough money and hadn’t considered I could invest myself.”

The reality

Investing is NOT just for rich people. Minimum investment amounts on some platforms are just £1 a month, though generally you can expect to put in around £50. If you have even a small amount of spare cash (spare is the key word here, if you need it for living costs or debt repayment, it isn’t spare), you can and should do it.

You might have more spare cash than you think. If you’d found you can save some money on your mobile or car insurance bill, for example, why not invest it? Remember that investments can go down as well as up so never invest what you can’t afford to lose.

As with many things in life, the earlier you get started the better. Starting early means you get to make the most of compound interest – a wonderful effect where the interest you earn then earns interest on itself. But whatever age you are, just start now.

Platforms we like with low minimum investment amounts include The Big Exchange at £25 per month or a £100 lump sum, AJ Bell at £25 per month, Interactive Investor at £25 per month and, if you want to start off even smaller, CIRCA5000 at £5 per month.

Avoiding greenwash

The new research also revealed that first-time investors had previously been deterred by not knowing how to find companies with strong social and environmental credentials. Indeed, there is lots of information and sometimes lofty claims – aka greenwash – to sift through.

For financial providers you can trust to deliver on their sustainability claims, check out our Good Egg companies. They can all prove they make a positive impact on people and planet as well as their customers and staff. For the rundown on more providers offering sustainable investments, see our Good Lists and reviews.

Risk warning: Remember that when you invest, your capital is at risk. Investments go up and down in value, and you could lose money as well as make it. How you’re taxed will depend on your circumstances, and ISA and tax rules can change.

Good With Money occasionally uses affiliate links to providers or offers, where relevant. This means that if you open an account or buy a service after following the link, Good With Money is paid a small referral fee. We choose our affiliates carefully and in line with the overall mission of the site.


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