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whilst trading is when you buy an asset and hold it for a short period before selling it for higher value, investing is quite different. investing is when you set aside money into something you believe will gain value over a long period of time but like trading, it can also have its risks.
When it comes to investing, you do not 1000 pounds already saved up. Every month use our budgeting guide and use your 30% you have put away and start from there! Beginners can start from as little as 50 pounds to start investing!
most common ways that people invest:
shares: A piece of a company. business owners sell stakes of their company to raise their capital and expansion. You ( shareholder ) would now own a fraction of the company's ownership and as their revenue increases or flunctuates, so does the value of your share. To minimise the risk in losing the money you have invested, its important to take internal and external factors into account before making an investment. You can do this by looking at their annual reports, the type of market they are in and any changes and trends in the economy.
funds: This is a mix of investments where you and other investors throw your money into. A fund manager then buys, holds and sells investments on your behalf so you are not searching and individually buying an asset. This is great option if you want to spread out your risks. Some banks like HSBC offer ready-made portfolios of a mix of investments where you can choose the level of risk to take so this is a great way for a beginner to start investing.
how to start!
choose a brokerage firm: a financial platform that facilitates the buying and selling of financial securities, such as stocks, bonds, and mutual funds, on behalf of investors.
there are many options to choose and some reputable ones you may want to take a look at are: Etoro, interactive investor or Trading212
Once you have found your brokerage platform, your parents would need to open a custodial brokerage account for you if under 18.
To open an account as a minor, you typically need a custodial account, which requires an adult, usually a parent or guardian, to oversee and manage the account until the minor reaches the legal age of majority. The adult will be the custodian of the account, and the minor will be the beneficiary.
The process and requirements may vary depending on the brokerage firm and jurisdiction, so it's best to contact the specific firm you're interested in for detailed instructions.
Once your account has been created, you will need to put money into your account and from there you can start buying assets. BUT be mindful that this is not something to rush into. Be sure of where you are putting your money into by perhaps talking to advisors or doing your own extensive research! from there it gets easier down the line and is a fun process!
before you decide to start investing yourself, open up a Junior ISA
An ISA (Individual Savings Account) is a tax-efficient savings and investment account available to residents of the United Kingdom. It allows individuals to save and invest money without paying certain taxes on the returns generated within the account ( this means you keep your profits witho! ) ISAs were introduced by the government to encourage saving and investing by offering tax benefits to individuals.
A Junior ISA works much like an adult ISA. The main difference is the tax-free savings allowance: with a Junior ISA, you can save up to £9,000 a year compared to an adult ISA where you can invest up to £20,000 per annum. The other fundamental difference is that a named individual (usually a parent or guardian) will have responsibility for the ISA until the child reaches adulthood.
Here are the key features of an ISA account:
Tax Benefits: One of the main advantages of an ISA is that any income or capital gains generated within the account are tax-free. This means that you do not have to pay income tax on interest earned on cash savings or dividends received from investments, nor do you have to pay capital gains tax on profits made from selling investments within the ISA.
Annual Allowance: Each tax year, individuals are given an annual allowance, which determines how much money they can contribute to their ISA accounts. This allowance can be split between different types of ISAs, such as Cash ISAs, Stocks and Shares ISAs, and Innovative Finance ISAs.
Withdrawals: You can withdraw money from your ISA account at any time without losing the tax benefits. However, any funds withdrawn cannot be replaced within the same tax year without affecting your annual allowance.
Transferability: You can transfer existing ISA funds from one provider to another without losing the tax benefits. This allows you to shop around for better interest rates or investment options without incurring any tax penalties.
Overall, ISAs provide a tax-efficient way to save and invest money for various financial goals, whether it's building an emergency fund, saving for a home deposit, or investing for retirement. It's essential to consider your individual financial circumstances and investment objectives when choosing the right type of ISA for your needs.
Types of ISAs
Cash ISA: A Cash ISA allows you to save money in a tax-free savings account. It typically offers a fixed or variable interest rate on your savings and is suitable for short-term savings goals or emergency funds. Must be 16 or over to open a cash ISA!
Stocks and Shares ISA: A Stocks and Shares ISA allows you to invest in a wide range of assets, including individual stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Any returns generated from these investments are tax-free.Must be 18 or over to open a stocks and shares ISA!
Innovative Finance ISA: An Innovative Finance ISA allows you to invest in peer-to-peer lending platforms or crowdfunding investments. Returns generated from these investments are tax-free.Must be 18 or over to open an innovative finance ISA!
Lifetime ISA (LISA): A Lifetime ISA is designed to help individuals save for a first home or retirement. It offers a government bonus of 25% on contributions, up to a maximum of £1,000 per year.Must be 18 or over and under 40 to open a lifetime ISA!
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