What are the safest methods to start investing please? I want to maximise my savings pot.

03 November 2021

Question by Thomas

What are the safest methods to start investing please? I want to maximise my savings pot.

Answered by Boring Money

Hi Thomas,

Thanks for your question.

If you want to invest in stocks & shares then there is some risk that you are going to have to take. That's the nature of it, you take a risk to get a potentially higher return.

With a bank account/savings account there is very little risk and subsequently you don't get much of a return. However, you have to take into account inflation which means that over time your money will buy less and less. This means that while your money is in a bank account it is essentially worth less and less meaning you are losing money. So some might say that this is a risk in itself.

With investments you are giving your money the chance to earn "real" growth which is growth higher than inflation. With this comes the fact that the price of stocks/shares goes up and down on a daily basis and that is the risk.

To ensure you are investing in a safe way you should make sure that the funds you invest in are diversified. This means they hold lots of different shares (potentially thousands) within them and that these shares are spread across the world and different industries. This helps to limit the risk of one country or industry in particular doing badly.

It is always important to remember that the price of shares will go up and down and that is guaranteed to happen. That's why you need to be investing for long term returns and not just over short term.

You could set up an ISA and pay money into this monthly. That way you are investing over time and get used to the ups and downs and after a while you will become more comfortable with investments.

Luke James

Answered by

Boring Money