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You’ve got the app. Here’s how you start investing.
You’ve downloaded Freetrade. You’ve made a passcode. You’ve finally got access to your account.
And now you’re wondering what to do.
Lots of Freetraders have that curious spirit, so we’ve put together this short introduction to help you start your journey with Freetrade on the right track.
How to start investing
When a lot of people think about investing, they imagine Leonardo DiCaprio and Jonah Hill sitting in an office building, shouting on phones.
That can make people feel as though investing isn’t for them.
But really that’s trading, not investing. It’s also a Martin Scorsese movie.
The biggest barrier stopping people from investing is psychological. They think they can’t do it and so they don’t.
But that’s just not true.
Why should you invest?
People invest for the same reason that they want a good interest rate — to grow their wealth without having to do very much.
Putting money into shares or ETFs could see it increase in value.
For instance, the 250 largest UK shares — cumulatively — increased in value by 28 per cent from January 2015 to January 2020.
That also explains why someone might choose to invest and not just leave their money to grow via interest.
Over an extended period of time, a diversified investment portfolio can be expected to increase in value more than cash sitting in a savings account.
Learn more: Why you should consider investing
Investing in shares
If you scroll through the ‘Discover’ tab on your Freetrade app, you’ll see hundreds of companies you can invest in across a wide range of sectors like Technology and Finance.
When you invest in a company, you will own a ‘share’ in it. Each share represents a portion of ownership in a company.
We can’t tell you which shares you should buy as there are a whole number of factors to look at when making that decision.
You might look at how profitable a company is today or how much money you think it will make in the future.
The industry a company operates in could also guide your decision.
Some Freetraders, for example, invest in green energy companies because they think they’ll succeed as governments set targets to reduce fossil fuel usage in the future.
The key thing to remember is to do your research and learn more about investing. The more you know about a company, the more likely you are to make a good investment decision.
You can also see what other Freetraders are up to and ask questions on the Freetrade Community forum. There are always interesting discussions on the forum and you can learn more about investing.
Investing in ETFs
ETF is an acronym that stands for ‘exchange-traded fund.’
And that’s really what ETFs are — they are funds that you can trade on an exchange.
When you go on Freetrade, for example, you can access ETFs that are traded on the London Stock Exchange.
The big difference between an ETF and a share is that an ETF lets you invest in multiple companies or assets.
For example, iShares Core FTSE 100 UCITS ETF holds investments in the 100 largest UK companies.
A share is different. Shares represent ownership in one company, which means you only have an investment in that company.
ETFs can be a less risky investment than individual shares because, by holding a range of assets, your investment gains the benefits that come with diversification.
Imagine investing in an ETF which has HSBC as part of it. If HSBC shares drop in value, your investment is unlikely to be affected too much.
Now imagine you only have shares in HSBC. If the bank’s shares drop in value, your entire investment will drop in value.
Of course, this also means you won’t feel the benefits as much if you held the ETF and HSBC shot up in value. But hey, you can’t have it all.
There is a lot of debate as to the merits of ETFs and shares. Some Freetraders buy ETFs, others buy stocks and many invest in both. Different investments make sense for different people. 🤔
If you’re interested in investing in ETFs, you can find a wide range in the ‘Discover’ tab of the Freetrade app by tapping the ‘Stock ETFs’ and ‘Bond ETF’s options at the top.
Investing in stocks that pay dividends
Many Freetraders like to invest in stocks that pay dividends.
Dividends are a portion of a company’s profits paid out at different points in the year.
Not all companies pay dividends. It’s generally larger, more established companies — like HSBC — that do.
This is because dividend payments are taken from a company’s profits.
As a general rule, younger companies will need their profits to pay for expansion efforts, or will not yet be making profits. Bigger, established companies often won’t, so they can afford to pay dividends.
Investing in companies that pay dividends is a strategy that many Freetraders take. They might reinvest that income or withdraw it as cash.
Still not sure what to do?
Investing is not an exact science. If there was one right answer, everybody would be doing the same thing.
That’s part of what makes investing so fun. Like sports pundits, investors are always discussing their ideas and seeing what others think.
The Freetrade Community is a good place to start if you’re still unsure about what you should do.
And if you aren’t certain about something, just ask — no fellow Freetrader is going to judge you! Just remember to do your own research and bear in mind that community members’ views are not Freetrade’s views.
For other queries, have a look at the Help section on the Freetrade website. Our Customer Operations team have answered questions for beginners there too.
If you have any other questions, feel free to reach out to us on social media or via the in-app chat function. We’re not going to tell you what to buy, but we can definitely help with any of your other queries.
This should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice.
When you invest, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results.
Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales (no. 09797821).
The views expressed above are those of community members and do not reflect the views of Freetrade. It is not investment advice and we always encourage you to do your own research.