Thinking of dipping your toes into the world of online investment? You’re in the right place. Investing online can seem like an intimidating prospect at first. With so many equities, bonds, currencies, commodities, and other vehicles to invest in, and so many ways to invest, it’s hard to know where to start. We’ve created an invaluable resource for online investors, giving you all the information and knowledge you need to confidently navigate the online investment environment. We guide you through the basics and help you along the path to becoming a successful online investor.
Invest online, right now
Ready to invest? Click on the links below to choose what you’d like to invest in, and learn more. Our helpful guides will walk you through the best investment choices and fill you in on how they work.
What is investing online?
Investing is the process of expending money into a financial endeavour, with the goal of making a profit. Investing is often mistaken with trading, which is a form of investing, but one that typically requires education and discipline to do successfully. Online investing refers to investments that can be made on your computer or mobile device, as opposed to at a bank or a brokerage’s brick-and-mortar office.
How to get started investing online
If you want to invest responsibly and intelligently, this is what we recommend you do to get started:
- Know your investment types. Read up on whichever investing vehicle you want to pursue. The more you know, the better equipped you’ll be to become a successful online investor in whichever asset you choose, be it commodities, stocks, bonds, or other choices. Don’t worry, we’ll go through the details on all of these below.
- Decide how much you’re willing to venture. While investing might not carry the same all-or-nothing implications as, say, gambling on a ballgame, you can lose considerable sums of money if you’re not careful. A common rule is to only invest what you can afford to lose. Also remember that investing £100 requires a different approach than does investing £10,000.
- Decide how much risk you’re willing to take. For instance, you can invest online in stocks, commodities, foreign currencies and other assets using leverage, a practice that involves borrowing money from a broker to increase your position. But just as leverage increases your potential gain, it also increases your potential loss.
- Decide what your timeframe looks like. Investing to build a nest egg for 20 years from now requires a very different strategy than trying to make a quick buck through day trading.
- Choose your broker. Find an online brokerage with low fees, high levels of customer service, and an intuitive platform that makes it easy for beginners to invest.
- Make your first investment. When you’re satisfied that you’ve done your due diligence, it’s time to take the plunge. Remember, you’ll make plenty of mistakes during your investing journey. The important thing is to learn from those mistakes and get better as you gain more experience.
Types of investments and ways to invest online
There are many assets you can invest in online, just as there are many different types of investors. Different assets could carry higher or lower levels of risk, be better suited to short or long-term investing, require more or less expertise and deliver faster or slower potential returns. Let’s take a look at some of the most popular investment options:
- Stocks. Stocks (or shares) are the name given to an investment that involves betting on the growth of a company’s valuation. One of the best known and simplest ways to invest, stocks can be bought or sold as short or long-term investments. By trading shares in a company, you’re betting on that company’s fortunes either improving (buying long) or getting worse (selling short). You can use leverage to increase your risk and your potential reward.
- Commodities. Commodities investing entails betting on the price of assets such as gold, silver, oil, wheat, corn or cryptocurrency. The goal of this kind of investing is to buy a contract for one of these commodities at an attractive price, then sell it at a higher price to make a profit. By trading commodities online, you gain access to global markets allowing you to trade without needing a huge bankroll.
- Forex. Forex (foreign exchange) trading is the conversion of one fiat currency into another. The goal of forex trading is to exchange one currency for another, in the hope of making a profit from price changes. Forex investments typically occur on shorter timelines, since you’re betting on the fluctuation of one currency against another rather than, say, investing in the future of a blue-chip company.
- Bonds. Bonds are fixed-income investments in which an investor issues a loan to a borrower, usually a company or government, with the borrower then using that capital to finance projects and operations. When you invest in bonds, you know up front when the principal of the loan will be paid to the bond owner. You’ll also know whether the borrower must pay you based on variable or fixed-interest terms, plus the rate of those terms. Bonds are among the safest, lowest-risk, least aggressive investment options available.
- Real estate. Real estate assets like houses, office buildings, and farms don’t exist online, but most of the processes involved investing in them can be conducted there. Real estate investing requires longer timeframes, since prices aren’t as volatile as most other investment vehicles. Beyond simply buying an individual property, you can also invest in baskets of real estate by owning shares in a Real Estate Investment Trust (REIT). Many REITs can be traded like stocks.
- Mutual funds. Mutual funds are run by experienced professionals who pick baskets of stocks depending on the fund’s stated strategy. If you like the stock market’s potential returns but don’t want to put all your eggs in one basket, mutual funds can make sense for your investment goals. Mutual fund strategies can include growth (picking stocks with the best growth potential), value (picking stocks that might be undervalued), large-cap (behemoths like Apple and Amazon) or small-cap (smaller companies with significant upside).
- Exchange-traded funds. An ETF lets you invest in a large number of stocks at one time. ETFs behave much like stocks too, fluctuating in price throughout the day (mutual funds only trade once a day, after the market closes). Like mutual funds, ETFs often come in themes, allowing you to focus on investments in different sectors, such as tech, health care, and energy.
- Index funds. Index funds let you mimic the performance of a financial market index, such as the S&P 500. This way, you’re following an easier, more passive investment strategy, where you’re simply betting on the overall market to go up over time. You can buy an index fund through your online brokerage account, with lower expenses and fees than most mutual funds.
- Savings accounts. The most known and easiest-to-understand investment vehicle, online savings accounts simply require you to hand your money to a bank, then collect returns based on a set annual interest rate. Savings accounts are especially useful when the stock market is in a downtrend. The downside of a savings account is that the returns might barely cover annual cost of living increases, and you could be missing out on bigger returns when stocks, commodities, and other investment vehicles are trending upward.
- Spread betting. Spread betting is an investment vehicle that lets you speculate on the movement of pairs of assets (such as foreign currencies or commodities), without actually transacting in the market. Spread betting consists of three main components: the spread of the instrument being traded, the direction of the trade, and the size of the bet made by the trader. It’s a riskier, shorter-term investment strategy than most of the others outlined here.
- Financial & Roboadvisors. If you don’t have the time or the will to investigate the best investment options, a financial advisor can do that for you. Financial advisors are professionals who suggest and deliver financial services to clients based on their financial situation and goals. Roboadvisors follow the same general principle, except that investing decisions are made based on computer models, with the most advanced roboadvisors sometimes using artificial intelligence to guide investment decisions. You’ll typically find roboadvisors on a financial app or website.
- Robots. A trading robot is a computer program based on a set of trading signals that helps determine which investments to pursue, and at what time. For instance, a forex trading robot will decide whether to buy or sell a currency pair at a given point in time. While trading robots take human emotion out of investing (often a good thing, given how greed and fear can sometimes govern our investing decisions), those skeptical of advanced technology might want to enter into this strategy with caution, since decisions are taken out of your hands. Keep in mind that a lot of the software out there might not be proven to deliver consistent results.
To find out more about these strategies, we suggest reading our guides and courses. However, if you’ve done your research and are ready to invest, click on the above links.
Our top tips for investing online
By now, you have a broad overview of how to invest online. Here are the key points to remember:
- Be sure about your budgets. Make sure the amount you invest doesn’t exceed your means – you don’t want to end up in debt.
- Set goals and strategy. Make sure the investment strategy you’re pursuing fits your investment goals, and your tolerance for risk.
- Stick to a logical investing plan, rather than reacting to emotions. If you follow a sound plan, you’ll be better equipped to understand your mistakes, and get better as you go.
- If market conditions change, have a plan for how to react. When financial markets rise or fall, don’t simply allow yourself to be dragged along for the ride. You can and should make decisions while keeping those prevailing market conditions in mind.
Unsure what to invest in?
Feeling unsure where to go from here? That’s normal. Here’s a short list of considerations to help you decide how to proceed:
- Budget size. If you have a budget smaller than £1,000, you may wish to steer clear of investment options that carry significant fees, because those fees will eat up a bigger percentage of your capital. Keeping things simple by pursuing investments like individual stocks could make the most sense here. Conversely, if you have a larger budget (say, greater than £10,000), you have a larger number of logical options to work with, therefore mutual funds, commodities, or forex investing could be a good starting point for you.
- Risk assessment. The more you know, the better equipped you’ll be to understand and deal with risk. If you’re interested in putting in the time to learn, more complex investing options such as spread betting could be for you. If not, simpler, lower-risk investment options such as bonds or even savings accounts make more sense.
- Market conditions. If stocks have tumbled into a declining market (also called a bear market), more defensive investment strategies such as bonds or commodities investing tend to make the most sense. On the flip side, if stocks are performing well, you can take advantage by snapping up individual equities, ETFs, and index funds, depending on how closely you’re willing to keep tabs on your investments.
- Know your investing goals. If you’re trying to make money quickly, you’ll need to learn the ins and outs of faster-moving investments such as spread trading. If on the other hand your timeframe is more like 30 years, you can opt to simply pick a good mutual fund and let the professionals do the work.
- Keep track of emerging trends. A few years ago, investing in cryptocurrency such as Bitcoin was a practice pursued by only the savviest investors, now it’s become a lot more common among novice investors. As technology evolves, you’ll find more investment opportunities that could be worth pursuing.
Try some of our investment courses for beginners
Still not feeling ready? We get it. We recommend starting here, learning investment fundamentals via our easy-to-understand educational courses. Learning the ins and outs of investing will help you feel secure and ready to embark on your online investment journey.