Investing for beginners

Investing is a popular way to grow your money and reach your financial goals. While there are no guarantees, it shouldn't feel complicated or uncomfortable.


Let’s help you to...

  • understand the basics of investing, including the risks associated.
  • be confident with your investment decisions.
  • know if investing could be right for your circumstances.
  • learn how to get started with investing and how to make the most of your investments.

1: Make your money work harder for you

There are lots of ways to invest, including Stocks & Shares and funds.

You don’t need a large sum of money to start investing. You just need to be aware that when you invest there are risks. Your investments can fall as well as rise in value and you may get back less than you originally invested.

This guide is to help you realise the opportunities you have to invest, and how to get started.

If you are in any doubt about making your own investment decisions, we recommend you seek advice from a suitably qualified financial adviser. There will normally be a charge for that advice.

2: Why do people choose to invest?

Investing money is important to people for different reasons. Are you wanting to generate additional income? You may also wish to generate income to supplement your pension.

Saving in cash accounts is one way to save for the future. The interest rate on offer is also a way to provide additional income. Inflation can affect your return and savings valuation with many cash savings accounts and current accounts tracking The Bank of England base rate. 

See below table for examples of the potential effects of inflation. Investments also involve more risk to your money than a savings account.


Investing and inflation

There are many reasons to grow your money: additional income, a large purchase; reaching a financial goal - even providing a lasting legacy.

While holding money in a savings account attracts less risk, generally this provides lower returns, which are also vulnerable to inflation. That's because, if inflation rises rapidly or remains high for long periods, your money may still grow but its buying power is less.

What £1,000 is worth in real terms:


2.5% inflation

5.0% inflation

7.5% inflation

10.0% inflation


5 years

2.5% inflation


5.0% inflation


7.5% inflation


10.0% inflation



20 years

2.5% inflation


5.0% inflation


7.5% inflation


10.0% inflation


3. Making investments work for you

Depending on your priorities and financial goals, there are other ways to ensure you get the most from your investments.

Invest for growth

The first goal for most investors is to increase the value of their investment/s, known as capital gain.

Stocks and shares are a good example, as they provide growth whenever the price of shares increases.

Invest for income

One popular way to do this is with investments that make regular payments, such as shares that pay dividends and bonds that pay interest.

Retirees who use this money to supplement their pensions is one example.

Re-investing for more

If you're not looking to take your money, you might want to consider re-investing any profit (dividends) to earn additional earnings over time. This is known as compound growth.

Depending on your circumstances this interest may also be free from certain UK taxes, meaning more of your money is working harder for you.

Most investors combine income and growth. Income investments (hopefully) make profits that can be re-invested to increase your money (or capital). Investments that have grown can be sold, ideally gradually, to provide you with additional income.

4. Your investment options


If you own a share, you own a stake in a particular company. Shares are listed on a stock exchange and the price of all shares will vary throughout the day.

  • Pros: Capital gains

If you invest wisely, your stocks could increase in value. Shares have historically provided better returns than cash when investing for a longer term, although this isn't guaranteed.

  • Cons: Capital loses

If the company you choose to invest in isn't doing well then the share price may fall - meaning you could lose money on your investment.


Funds are a form of collective investment where professional Fund Managers will pool together investors’ money and invest on their behalf. Since your investment can be spread over a range of different stock markets, sectors and investment types (without you having to buy lots of individual shares), the risk involved may be reduced.

  • Pros: Diversification

Funds often spread their holdings across different stocks or markets, which reduces the risk. So if one of their holdings is not doing well others in the fund may be doing better to make up for it.

  • Cons: Liquidity

A fund manager may have to sell holdings to pay investors back who are exiting the fund. If the assets they hold are difficult to sell - such as property - then this can mean delays in getting your money back.

Exchange Traded Funds (ETFs)

Exchange Traded Funds (ETFs) trade on the stock exchange in a similar way to shares. ETFs are usually designed to replicate an index, sector, commodity or currency. They invest in a range of assets with the aim of closely tracking its performance.

  • Pros: Lower fees

ETFs can help build a diversified portfolio.

  • Cons: Performance

An ETF is designed to track a market, unlike funds, which are actively managed to try and outperform it. This can impact the performance.


Please note: We are not able to trade or hold US listed ETFs.

Investment Trusts

An investment trust is a company that invests in several different assets. Unlike funds, shares in investment trusts trade on the stock exchange just like shares.

  • Pros: Liquidity

Investment Trusts don't have to sell assets when investors exit the fund. This means that investors should be able to sell their holdings easily on the stock market. The price could go down if more units are sold than bought.

  • Cons: Potential Price Volatility

The price of an investment trust is partly based on the value of the assets it owns. This can also be influenced by the demand for the share itself. If investors don't feel that the investment trust is being managed well, then this can negatively affect the price as more people will want to sell than buy the share.

Bonds and Gilts

Bonds and gilts are created by companies, or governments, for investors as a way of raising money. When you invest in a bond or gilt, you’re lending money to the company or government for a fixed period in return for a fixed rate of interest.

  • Pros: Stability

Bonds and gilts are a more stable investment than stocks with a lower risk and steady returns.

  • Cons: Growth potential

Bonds and gilts don’t always offer the possibility of high long term returns, which is a disadvantage compared to the performance of other stocks. Interest rates, currency fluctuations and economic uncertainty can impact the value of bonds and gilts.

5. Ready to invest?

Having reviewed the steps to investing, you may feel ready to invest. Before you go any further, please read the statements below and check that you agree with all of them:

  • You have a safety net. We recommend three months of savings, ideally in an easy access account. To cover unexpected needs, such as car or household repairs and any major spending you may have planned.
  • You’re happy to accept some risk on your investment.
  • You’re prepared to invest for the medium to long-term (at least 5-10 years).
  • You have no significant short-term debts. These are likely to cost you more in interest than the amount of any growth you may achieve on an investment.
  • You feel confident in making investment decisions.

Start investing

If you’re not sure about investing, seek financial advice. You may be eligible for financial advice through our partnership with Schroders Personal Wealth. There will normally be a charge for that advice. Tax treatment depends on individual circumstances and may be subject to change in the future.

Important legal information

Halifax Share Dealing Limited. Registered in England and Wales no. 3195646. Registered Office: Trinity Road, Halifax, West Yorkshire, HX1 2RG. Authorised and regulated by the Financial Conduct Authority under registration number 183332. A Member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager.