The beginners guide to investing (2025 UK edition)

I recommend iWeb because:

• They have some of the lowest fees in the UK. It's completely free to just hold stocks there.

  ▶ Do fees of 1% or 2% really matter?

  Yes! Because these fees compound, it can significantly affect your investment returns.

  Just like how the power of investing is in compound growth, having compounded fees eats a lot into your portfolio.

  This article shows the difference between a 1% fee and 3% fee over 30 years changes a ~$5M pot into a ~$3M pot!

• They allow you to invest in pretty much whatever you want, which gives you flexibility later.

• Their platform is simple and doesn't try to encourage frequent trading.

• They're trustworthy as part of Lloyds Banking Group and are regulated by the FCA.

You're not locked in - you can open multiple ISAs across different providers later, and transfer your investments between them if you want (although the transfer process can be slow-ish). You can only put up to the ISA limit each year across your ISAs - you're responsible for making sure you don't go over this if you have multiple ISAs.

If you do go with another provider, make sure that:

• they are on the FCA register
• you understand the fees they will charge

In general, yes if they are FCA regulated.

Two things are in place to handle this scenario:

• Segregation of Assets: Your investments are kept separate from the provider's own assets. So if the provider goes bust, all your investments should still be there. iWeb explains how they achieve this on their website.
• FSCS compensation: If something has gone very wrong and assets have not been kept separate, the government-backed Financial Services Compensation Scheme (FSCS) guarantees up to £85,000 (and sometimes more). This is done on a per-bank basis - so plausibly with iWeb that means if you also had an account with Lloyds Bank only a total of £85,000 would be reimbursed for both.

Note that this protection is about the ISA provider failing - it doesn't protect you against your investments losing value through normal market movements.

You can make investments in a general investment account without an ISA. However, any profits ('capital gains') you make will be taxed by the government.

An ISA (Individual Savings Account) is just the name for an investment account where you don't have to pay tax on the profits. The government set these up to encourage people to save money.

The one limitation is that you can only put so much into your ISAs each tax year. In the 2024-2025 tax year, this limit was £20,000/year, but you can find the updated limit on GOV.UK. Once the money is in your ISA, it can grow beyond this limit, and you can add to it every tax year.

There's essentially no downside to using an ISA compared to a regular investment account, so you should always use your ISA allowance first.

iWeb's ISA is a stocks & shares ISA. This gives you a lot of flexibility, and you can use it to invest in shares, trusts, funds (including ETFs), and bonds. These investments can go up or down, but over many years they tend to go up - for example, the FTSE100 returned on average 6.3% per year from 2003 to 2023.

Cash ISAs are similar to a bank savings account: they offer lower returns, in exchange for more safety. Most give you a fixed interest rate, and your money can only go up. Over the past 10 years, these have usually offered rates of 0.5-2%. As of December 2024, these have risen to rates of up to 5% due to inflation, but it is expected that these will drop soon.

If you want the benefits of a guaranteed rate, you can also get this by buying a cash fund (also known as a money market fund) in your stocks & shares ISA. In my opinion this makes cash ISAs a little redundant.

Lifetime ISAs are stocks & shares or cash ISAs that offer a 25% government bonus on money you put in, but are much more restrictive. You can only put £4,000 per year into them, and can only spend them on your first home or retirement. Fewer providers offer lifetime ISAs, so fees tend to be higher. These can be good if you have clear plans on how to use them, but if you're unsure I'd recommend to defaulting to a standard stocks & shares ISA.

Help-to-Buy ISAs are no longer available to new savers, but were similar to lifetime ISAs.

Innovative finance ISAs are similar to stocks & shares ISAs, but allow you to make weirder more risky investments. This includes peer-to-peer lending and crowdfunding. There are limited providers who offer them, they're more complex, and they tend to be higher risk (without good evidence of delivering a higher return). As such, I think beginners should usually avoid them.

Predicting the market is really hard. If you really are able to accurately predict the market, you should be earning millions at a hedge fund. At this point you should get independent financial advice on your investments.

Even if you had perfect information about when the market will crash, you'll still make less money trying to time it.

An index is just a list of companies. E.g. FTSE100 is the largest 100 companies listed on the London Stock Exchange (originally set up as a collaboration between the Financial Times and the London Stock Exchange, hence FTSE).

A fund is a group of people bringing their money together to invest.

An index fund is therefore a group of people bringing their money together to buy shares in a list of companies. You might also hear index funds called 'passive' funds because they just follow whatever the index says, without 'active' management by fund managers picking individual stocks.

Companies like Blackrock and Vanguard manage these index funds. For example, they buy and sell the company shares when people join and leave the fund or companies move on and off the list. This work takes them time, and so they charge a management fee for this work. Because they're buying based on the index, the main point of comparison is just who charges a lower cost for their management fee - making low-cost index funds most effective.

If you're unsure, start with the FTSE 100. This tracks big companies in the UK and is suitable for most people. You can always change where you allocate your money in future - remember the biggest mistake is not starting!

When choosing funds, look for "Acc" or accumulating versions. These automatically reinvest any dividends, maximizing the power of compound growth over time. Only choose income funds if you specifically need regular payouts, like during retirement.

Other good options for low-cost index funds are:

• FTSE250 if you think medium-big companies in the UK will do well. GB00B7W4GQ69 (VMIG)
• S&P500 if you think big companies in the US will do well. IE00BFMXXD54 (VUAG).
• NASDAQ100 if you think tech companies in the US will do well. IE0032077012 (EQQQ).

The reason I've picked the specific these funds is because

1. they're allowed to be held in a UK ISA;
2. these trackers represent the most common things people want to track; and
3. they have low fees.

If you find other accumulating trackers for the same indexes with lower fees these are probably good too.

Diversification is good! Index funds are already a fairly diversified investment (over picking individual companies), so for the beginner you probably don't need to do this.

As you start to invest more, you can split up your money between some of the indexes. I'd probably recommend only doing this if you're putting in at least £2,000 per fund, because otherwise the transaction fees can get pricey.

• Crypto is highly volatile, largely unregulated, and difficult to get good diversification in. It is also complex, which has led to many crypto scams floating around. As a beginner, I would tread with caution.
• Art requires specialist knowledge and usually needs large amounts of money to invest meaningfully. Online platforms that offer fractional art investing tend not to go well.
• Gold can be useful to hedge against certain risks. You can buy funds that track gold (or other precious metals) in your iWeb ISA.

All of these assets are not inherently productive or income generating. By this, I mean that you expect a company to be worth more in the future: it's genuinely investing in something that you expect to produce goods and services and make a profit. However, most crypto assets, art and gold are not productive - the main benefit is that they might stay stable, not grow.

For most people starting out, these shouldn't make up a significant amount of your investment portfolio. Stick to broad market index funds until you have more experience and a solid foundation.

Premium Bonds are a government-backed savings product with a £50,000 maximum investment. Like ISAs, they're tax-free, but typically offer lower returns than investing in the stock market.

You might want to buy premium bonds if:

• You want a completely safe place to store money and the expected return beats available cash ISA rates; or
• You've already used up your yearly ISA allowance and want another tax-free savings option (if the rates they offer are greater than the best other savings accounts rates after tax)

First, put as much as you can into your ISA.

Then, make your remaining investments in your 'Share Dealing Account'. This is automatically created when you open an iWeb ISA. You can invest in this in the exact same way as your ISA, although you'll need to pay capital gains tax on some of your profits when you sell.

Alternatively, you can put money into premium bonds for a tax-free savings mechanism. However, as the interest rate is usually lower you'd want to trade the tax savings off against this.

I expect many people landing here to be people who trust me, that I've recommended here. If you don't know me, you should be very skeptical of random people giving out financial advice on the internet!

You should seek out financial advice from other people you trust (and seem competent). Advocates of the low-cost index fund strategy include:

• Warren Buffet
• Charlie Munger
• Jack Bogle
• Ben Felix, an influencer in the personal finance space who is a licensed portfolio manager.

I don't recieve anything for recommending the above platform or investments - these are just my good faith best recommendations.

You can get free finance advice, including talking to a human about ISAs and investments, from the UK Government's Money Helper service.

This is not regulated financial advice though. For that, you'll need to pay a professional - what you're looking for is an 'independent financial advisor' who is listed on the FCA register. unbiased is a directory of these advisors.

First, put as much as you can into your ISA.

Then, make your remaining investments in your 'Share Dealing Account'. This is automatically created when you open an iWeb ISA. You can invest in this in the exact same way as your ISA, although you'll need to pay capital gains tax on some of your profits when you sell.

Alternatively, you can put money into premium bonds for a tax-free savings mechanism. However, as the interest rate is usually lower you'd want to trade the tax savings off against this.