Investing for beginners: where to start?

Starting your investment journey can feel overwhelming. Questions like "Where should I start?" or "What’s the safest way to invest?" are common for beginners. Investing is a powerful tool to grow your wealth over time, but with so many options, it's easy to feel lost.

For those new to investing, it’s crucial to understand the basics and explore beginner-friendly options. This quick guide will introduce you to passive investing, ETFs, and sustainable portfolios—concepts designed to simplify the process and reduce risks. By the end, you’ll understand how ready-made portfolios, like those offered by the Peaks app, can make investing accessible for everyone.

Please note that this article is intended as an overview, not advice. As a company, Peaks does not provide financial advice and only executes customer orders. 

Beginner investor? Get the lay of the land before your first investment

For the beginner investor, there’s a wide range of options to consider. While some may be drawn to the potential of individual stocks or active investing, others might prefer the simplicity of passive investing through tools like ETFs. Each approach has its advantages and considerations, so understanding the differences is key to finding what works best for you.

Active investing requires time and research to select individual stocks or funds, with the goal of outperforming the market. This strategy can be appealing for those who enjoy deep diving into financial data but may come with higher costs and risks. In contrast, passive investing focuses on long-term growth by tracking the market through index funds or ETFs, which offer diversification and lower fees. For those looking for a balanced starting point, passive investing is often considered a simpler and less time-intensive approach, although, like with any form of investing, there is always risk involved.

When it comes to investing for beginners, simplicity and diversification are crucial factors to keep in mind. Diversification—spreading your investment across different sectors or asset types—helps manage risk by reducing the impact of market fluctuations on your portfolio. ETFs, for example, are a convenient way to achieve diversification, as they bundle multiple stocks or bonds into a single fund.

Another important consideration for beginners is aligning your investments with your personal values and goals. Sustainable investing, which focuses on companies that meet environmental, social, and governance (ESG) standards, is an option that appeals to many. This approach combines financial growth with a positive societal impact, providing both personal and environmental benefits.

For a beginner investor, it’s essential to evaluate your risk tolerance, financial objectives, and the time you’re willing to dedicate to managing your portfolio. Whether you’re exploring individual stocks, ETFs, or ready-made portfolios, there’s no one-size-fits-all solution. Whatever path you take, building a strong understanding of your options is the first step toward confident investing. So read on to learn the need-to-know principles that will help you make the decision that’s best for you.

What is active vs. passive investing?

When starting out, one of the first decisions you’ll make as a beginner investor is whether to pursue active or passive investing. Let’s break down these strategies:

Active investing

Active investing involves buying and selling individual stocks or funds with the goal of outperforming the market. This approach often requires extensive research, time, and market knowledge. Professional fund managers may oversee active portfolios, but this comes with higher fees due to frequent trading and management costs.

Passive investing

Passive investing, on the other hand, aims to match the market’s performance rather than beat it. This is often achieved through investments in index funds or Exchange-Traded Funds (ETFs), which track the performance of a specific market or sector. Passive investing is particularly appealing for beginners because:

• It requires less hands-on management.
• Fees are significantly lower than active funds.
• The long-term approach aligns well with wealth-building goals.

For first-time investors, passive investing offers simplicity and cost-efficiency, making it an excellent choice.

Why ETFs are a lower-risk option for beginner investors

Exchange-Traded Funds (ETFs) are a popular choice for beginner investors, and for good reason. An ETF is a collection of stocks, bonds, or other assets bundled together and traded on the stock market like a single stock. Here’s why ETFs are considered a lower-risk investment:

1. Diversification

By investing in an ETF, you’re spreading your risk across multiple assets. This means your portfolio won’t rely on the performance of a single company, reducing the impact of market volatility.

2. Lower costs

ETFs typically have lower fees compared to actively managed funds. This makes them a cost-effective option for investors who want to grow their wealth without high expenses eating into their returns.

3. Transparency and ease of trading

ETFs are traded openly on stock exchanges, allowing investors to see exactly what they own. This transparency builds trust and makes ETFs easier to manage.

4. Sustainable ETFs

Sustainable ETFs go a step further by focusing on companies that meet Environmental, Social, and Governance (ESG) criteria. These companies often demonstrate strong governance practices and environmental responsibility, which can lead to lower volatility and long-term stability. Sustainable ETFs combine financial returns with positive societal impact, making them a smart and ethical choice for beginners.

Sustainable investing: a win for beginner investors and the planet

Sustainable investing is more than a trend—it’s a strategy that aligns financial goals with values. By focusing on ESG criteria, sustainable investing prioritises companies with responsible practices, reducing long-term risks.

Why sustainability matters

Companies that meet ESG standards are typically better equipped to handle challenges like environmental regulations, social scrutiny, and governance issues. This makes them less volatile and more stable over time. As a beginner, investing in sustainable ETFs allows you to contribute to a better planet while managing financial risks effectively.

Peaks’ commitment to sustainability

At Peaks, sustainability is at the heart of every portfolio. The app exclusively offers portfolios made up of sustainable ETFs, ensuring that your investments align with your values and support responsible companies and endeavours. Note that when you build a custom portfolio, your choices include funds that fall outside of our sustainability criteria, such as cryptocurrency ETPs.

Simplifying investing with ready-made portfolios

For beginners, choosing individual investments can feel like a daunting task. This is where ready-made portfolios come in. These are pre-assembled collections of ETFs designed by experts to match various risk profiles.

Benefits of ready-made portfolios:

1. Expert-designed: Financial experts create these portfolios, ensuring a balanced mix of assets.
2. Customisable risk profiles: Beginners can choose a portfolio that matches their comfort with risk, typically determined by the mix of stocks and bonds. For example:
• High-risk portfolios may have a higher percentage of stocks for greater potential returns.
• Low-risk portfolios include more bonds, offering stability and lower volatility.
3. Time-saving: Avoid the complexity of researching and managing individual investments.

How Peaks helps first-time investors

Peaks simplifies investing by offering ready-made portfolios in the app. Whether you want to err on the conservative side and opt for a Cautious or Balanced portfolio, or you’re a high-risk, high reward type of person who opts for an Ambitious or Adventurous portfolio, there’s an option tailored to every preference. Each portfolio is designed to be well-diversified and sustainable, taking the guesswork out of investing. For those who want to be extra conservative, there’s also an entirely different account – the Interest account, which relies on overnight swap rates to receive a return following the interest that banks charge each other, daily. 

How to get started as a beginner investor with Peaks

Ready to take your first step into investing? Here’s a simple guide to get started with Peaks:

1. Download the app: The Peaks app is available on iOS and Android, making it easy to access on the go.
2. Complete onboarding: This includes a suitability test, to make sure you are aware of the risks involved with investing.
3. Choose your risk profile: Decide how much risk you’re comfortable with. Peaks offers profiles ranging from cautious to adventurous.
4. Start investing: Select a ready-made portfolio that aligns with your risk profile.
5. Track your progress: Monitor your investments in your account dashboard and see what your future could hold using the Returns forecast tool.
6. Think long-term: Successful investing requires patience. Focus on steady growth rather than short-term gains.

Start your investment journey with confidence

Investing doesn’t have to be intimidating. By starting with beginner-friendly options like passive investing, ETFs, and sustainable portfolios, you can grow your wealth while staying true to your values. Peaks makes the process simple, sustainable, and accessible through its ready-made portfolios, tailored to your risk profile.

Disclaimer: Know that investing always involves risks. Peaks is an execution-only service and does not provide financial advice.

Ready to start investing responsibly? Download the Peaks app today and take your first step toward building a sustainable financial future.