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

Written by Lori Campbell on 10th Oct 2023

This article is from the Good Guide to First-Time Investing, which you can download for free here.

Recent research from sustainable investors Liontrust, a ‘Good Egg’ firm, and positive impact platform The Big Exchange – 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 The Big Exchange were asked why they hadn’t invested before – include “I didn’t understand how,” “I was 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 easy-to-use sustainable investment platforms and top 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 those that are actively managed. However, they also come with potentially lower returns and ability to make a positive impact in the world. 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 ‘wrapper’ for your investments such as a Stocks and Shares ISA (this will suit most people starting out), Junior ISA, Lifetime ISA or Innovative Finance ISA. More on this in our Good Guide to First-Time Investing.

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 “I 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. 

Times are tight but you might have more spare cash than you think. If you find 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 regular investment amounts include The Big Exchange at £25 per month, AJ Bell at £25 per month and Interactive Investor at £25 per month.

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