Thinking about investing? There are compelling reasons to move at least some of your money from standard savings accounts into the stock market. While risks exist, the long-term rewards can be substantial.
Many people assume you need to be wealthy or a certain age to start investing, but even setting aside just £50 a month can be worthwhile. Before you begin, consider your goals, time horizon, risk appetite, and desired returns.
For most, choosing funds is wiser than buying individual shares, as funds spread risk and are managed by professionals. Here's expert advice on investing £50 a month across different life stages.
Before You Start
Build an emergency fund covering three to six months of essential expenses before investing. Then, define your investment goal and timeline.
"Age can be a useful rule of thumb, but it’s ultimately the timeframe for needing the money – and the investor’s tolerance for volatility – that should determine risk and fund choices," says Jason Hollands of Bestinvest.
In Your 20s
Your 20s are volatile as you launch your career, so prioritize cash savings, perhaps in an instant-access Cash ISA. For money you won't need for 3-5 years, consider a cautious fund via a Stocks and Shares ISA.
Younger investors benefit from time in the market and may opt for a growth portfolio, like the Evelyn Smart Growth Fund, with at least two-thirds in shares. Aim for returns of at least 2.5% above inflation (more for high-risk portfolios).
Your risk appetite should align with your goals. For example, saving for retirement allows higher risk than saving for a house in five years. Ready-made portfolios from investment apps can match your risk profile. As you near your goal, reduce risk.
For higher risk, a global equity tracker fund like the Fidelity Index World Fund or HSBC FTSE All World Index Fund (with charges around 0.12-0.13%) offers diverse exposure. However, a multi-asset fund may be safer for shorter horizons.
In Your 30s
Earnings typically rise in your 30s, but life goals multiply. Use "best fund" lists from companies like Bestinvest as a starting point, but always research.
If you have children, consider saving for university from birth. A tax-free Junior ISA allows up to £9,000 per year, with the child accessing funds at 18. Starting early permits higher risk; for instance, Polar Capital Global Technology has delivered strong returns but carries high risk.
In Your 40s
The "sandwich generation" (ages 40-60) often juggles caring for children and parents, making investing less common. Yet retirement is still 20-30 years away, so equities should remain a portfolio backbone.
Consider fixed-income funds (government/corporate bonds) or multi-asset funds to smooth volatility. Use ISAs for pre-retirement goals due to flexible access. Other priorities include overpaying your mortgage or boosting your pension.
In Your 50s
If retirement looms, boosting savings and investments is crucial. Resist the urge to reduce risk too aggressively; some experts argue that equities still offer growth potential for the long term.
For more tailored advice, consult a financial advisor.
This article is for informational purposes only and does not constitute financial advice. Always do your own research or consult a professional before investing.