The first investment step

So you think it’s possibly time to start investing but the idea is as frightening as hurtling down a black run backwards? There are some relatively easy ways to get going…gently.

Who will it suit?

You can lose money when investing. It’s not cash. So timeframes really matter. If you are investing for less than 5 years, shares can be unsuitable.

Imagine it’s 2019. You want to buy a flat in 2020. You invest your deposit in a shares account. The BANG coronavirus happens and markets have a panic. If you had been forced to sell, you would have lost money.

Now imagine that you invested in 2019. And you wanted to buy a flat in 2026. You would have ignored the impact of coronavirus on your account and now things would have recovered and be steaming ahead. This is why people bang on about timeframes so much.

Also another golden rule. Make sure you have first saved about 3 – 6 months of income in cash. If something unexpected happens, you can draw on your cash and not be a forced seller of any shares at a time which could be bad.

If you can tick the longer-term timeframe box and the cash buffer box, then investing could be for you. Robo advisers are a very good way to start. They provide the equivalent of an investment ready-meal. And you can often start with small amounts - £100 or less.

You could put in a small amount and just ‘learn on the job’ for a period of time. We all learn more when we have skin in the game.

Finally for most beginners, it makes sense to invest into an ISA. This is a tax-free account and will be the most sensible account for the vast majority of beginners.

What does it cost?

Expect to pay between about 0.5% and 1% on your total balance every year. This is between about £5 and £10 on every £1,000 invested.

To work it out, make sure you factor in the cost that the robo charges, the cost of all investments in your account, and finally any transaction costs. They should break it all down easily enough on their sites. If not – go somewhere else. There’s no excuse for this not to be clear.

What are the drawbacks?

For more confident investors, it could be cheaper to buy a ‘passive multi-asset’ fund on a mainstream investment platform. But this could feel more complex to set up. BlackRock, BMO and Vanguard offer credible options.

And you will also need to get comfortable with the concept of risk. Most robos will ask you to pick a Risk Profile of between 1 and 5 or 1 and 10. Avoid the urge to treat this like buying a toaster online – don’t just go for the middle one in the list of 5. Many of the robos have quizzes to help guide you into the right risk profile – a higher risk profile may sound scary but if your timeframes are long this could well be the most sensible option. Take the time to get this one right.

Where can I find out more?

Our Best Buys tables for ISAs have an Easy filter – have a look and see what might be the best option for you.