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How should I start investing my savings?

If you’re looking to invest your savings, we’ve put together a step-by-step guide to get you started, including why you should invest and how to mitigate risk.
How should I start investing my savings?
Reading time: 5 mins

Having a savings account is a sensible thing to do. Should you ever need to pay a bill that takes you by surprise, or pay for things like repairs on your car or home, it’s always reassuring to know that you have savings you can use to cover these costs.

However, if you’ve got long-term goals in mind then perhaps saving isn’t always ideal. While it’s important to have an emergency savings fund, investing could help you reach your long-term goals, such as preparing for your golden years or planning for your children’s future.

If you’re looking to invest your savings for the long-term, here’s how you can get started.

Why consider investing?

With a savings account, you make money by earning interest on the money you deposit into the account. However, when this interest falls below inflation, the value of your money could see its value decrease - leaving you with less purchasing power. For example, if you withdraw your savings from your account during this time, you won’t be able to afford as much as you might have before. In other words, the price of goods and services has increased faster than your savings have.

With investing, your returns depend on how much your investments are worth when you sell them. Although this could mean you get back less than you initially invest, there’s a chance for higher returns.

Also, over the long-term, stocks tend to beat cash. In 2023, it was reported that Barclays research based on 122 years of data found that the likelihood of stocks beating out cash increases from 74% over five years and 91% if they're held for ten instead.1

Getting started: How to invest your money

Do it yourself or trust the experts

First things first, you’ll need to decide whether you’d like to invest yourself or get a robo-investor to do it for you. There are also many other options available for potential investors.

Robo-investing aims to make investing simple and accessible to everybody. With digital investment services (also known as robo-advisors), you don’t need much knowledge or experience to get started since the investing is done for you. All you need to do is decide how much to invest and choose your risk level. You’ll even have the choice between different investment products, including Stocks and Shares ISAs that allows you to invest tax-efficiently and Ethical Investment Plans that will give you the opportunity to have a positive impact on society and the environment

On the other hand, picking your own investments (DIY investing) takes much more time and requires some knowledge and experience with investing. You’ll need to be confident in your ability in choosing the right investments and doing the hard work yourself, from analysing market data, reading financial news, creating your plan and managing it - which is why this method isn’t for everyone.

Investing small sums frequently

Once you’ve decided on your method, you can start to think about investing small sums regularly. There’s no need to have Bill Gates’ fortune to start investing. With robo-investing platforms, like Wealthify, it’s now possible to take the plunge into the investment world with as little as you like. It’s possible to grow your money by investing small sums, and the key is to it frequently. For example, if you start with an initial investment of £500 and decide to invest just £50 each month, your investments could grow to £7,719 over 10 years2. With this method of investing, your money is likely to grow and compound (when reinvesting your returns generates more return) over time.

Mitigating your risk

There is an element of risk involved when you decide to invest your savings. However, there are ways you can mitigate this risk. Robo-investing platforms, like Wealthify, allow you to choose your level of risk from Cautious all the way up to Adventurous. The investment style you choose will determine what gets included in your plan. For example, bonds are typically less risky than shares, so a Cautious Investment Plan may include more bonds, whereas an Adventurous Plan will be more dominated by shares.

Diversification is another way you can mitigate your risk when investing. Spreading your money across different investments and regions can help you to mitigate any risk by reducing the impact of poorly performing investments on your Plan. Putting all your eggs in one basket can be risky. Imagine a company you have invested in runs into financial trouble, and you’ve invested all of your money into the company, your investments will likely suffer.

How to invest in a Stocks and Shares ISA

Did you know? Investments are subject to UK tax which could eat into your returns. With this in mind, you could choose to make the most of your returns by investing in a tax-efficient Stocks & Shares ISA. Your ISA allowance for the 2022/23 tax year allows you to invest up to £20,000 (subject to change) without paying UK tax on any gains - meaning you get to keep more of your returns!

You can also choose to invest ethically with a Stocks and Shares ISA, so you can be confident your investment is contributing to a better world.

Investing for your future

Now that you know investing is easier than you might have previously thought, why not make the most of your savings by investing them into a Stocks and Shares ISA? Your personal ISA allowance renews every tax year, so don’t forget to make the most of it each tax year. By investing small sums regularly, and diversifying your investments, you can kick-start your investment journey and plan for your future. 

  1. https://www.sharesmagazine.co.uk/article/how-much-money-can-i-make-from-investing-in-stocks-and-bonds
  2. This is the projected value for a Confident Plan (Medium Risk Plan) with an Original theme. This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £6,343. If markets perform better, your return could be £9,364. Values correct as of 13/02/23.

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

The tax treatment depends on your individual circumstances and may be subject to change in the future.

Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.

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