Investing in an investment company means buying its shares on the stock exchange. There are various ways to go about it.
- Investing with or without financial advice.
- Investing regularly (e.g. monthly), or in lump sums now and then.
- Investing within a special account - like an Individual savings account (ISA) or Self-invested personal pension (SIPP).
- If you invest without advice you’ll need to select your own investment company. You can do this by buying your shares directly through an investment platform.
Instead of investing a lump sum you can choose to invest regularly – as little as £30 per month.
Investing regularly is one way of reducing the risk of investing in the stock market. To understand why, imagine that you have a large lump sum to invest. If you invest this sum just before markets fall, you’ll immediately suffer a loss. Splitting that lump sum into several smaller amounts means that if markets do fall, you’ll benefit from investing some of the money at lower share prices.
This effect is sometimes called ‘pound-cost averaging’. This means that when prices are high you’ll buy fewer shares and when prices are low you’ll buy more shares, but because you’re investing regularly the difference will even itself out.
ISAs, Junior ISAs and Self-invested personal pensions (SIPPs)
These aren’t investments in themselves. Instead, they’re accounts in which to buy and hold stocks and other investments. Often they offer tax breaks to encourage people to save and invest.To find out more, visit the pages on ISAs, Junior ISAs and Self-invested personal pensions (SIPPs).