Most of us invest in one way or another to be able to afford the things we want to buy in the future – like holidays, or school fees, or save towards a comfortable retirement. Investing is a way of making our money work harder for us, and potentially generating a better return than a savings account, although it’s important to remember that investing in stocks and shares is riskier because their value isn’t guaranteed and can go down as well as up. You could end up with less than you invested. It’s generally used for long-term savings when your goal is at least five years away. Investing your money for a longer amount of time will give it the best chance to grow and gives your savings time to recover from any falls in stock markets.

Why invest?

So why would you take the risk of your investments falling in value when you could just put your money in a bank savings account? The main reason is that investing can give you greater returns over the long term, although this isn’t guaranteed. 

Another reason for investing is rising prices or inflation. When inflation is high, the returns from your bank account may not keep up. If the interest you receive from your bank account is lower than inflation, that means you’re losing money because you can’t buy as much with your savings.

But remember, unlike a bank savings account, investment returns aren’t guaranteed and they can fall as well as rise in value. You could end up with less than you invested.

What are investments?

There are lots of different types of investment. Some people invest in investment funds, where their money is pooled together with other investors and managed by a professional fund manager.

These funds invest in what are known as asset classes (like company shares, bonds, cash or commercial property). Investing in a fund allows you greater access to a wider range of assets within an asset class, such as companies, industries and countries, than if you invested directly in a single company’s shares for example. This is called diversification, which just means not putting all your eggs in one basket.

Diversification is one of the best ways to manage risk, because you’re not exposed to the fortunes of one company or asset class alone. It also means you have a professional fund manager choosing what to invest in, rather than having to research suitable investments yourself.

An investment portfolio is the collection of assets or funds you’re invested in.

How do I invest?

Most people invest through their pension or stocks and shares ISA. When you join your pension scheme or take out an ISA, you’ll usually have a choice of investment funds, offering a range of investment types and asset classes. Some funds invest in a ready-made mix of asset classes and may even let you choose the risk level you’re comfortable with, to make it easier for you to select the right option for you.

Through your ISA or pension, you may even be able to invest directly in company shares or commodities like gold or coffee.

Get familiar with the basics in our video


Whether you’re saving for retirement, a child’s education or a dream holiday, the funds you invest in can make a big difference to how your savings grow.


When choosing which funds to invest in, it’s important that you understand what you need the outcome to be, and find the funds that can help you achieve your goals. For example, you should think about:


What do you need from your investment?


How much do you need your funds to grow to meet your saving needs?


What’s your risk appetite?


All investments carry some degree of investment risk, and may fall as well as rise. Generally speaking, riskier funds have better long-term growth potential than less risky funds, but they’re also more likely to fall in value.


Less risky funds are less likely to fall in value, but the downside is that they tend to grow more slowly.


In all cases the value of your investments can fall as well as rise and you may get back less than you invest.


So, you’ll need to work out the balance between risk and growth potential that’s right for you. You could take some financial advice to help you with this.


Do I need to invest long term or short term to reach my goals?


If you’re investing for the long-term, say ten years or more, you may be more prepared to weather some market ups and downs in the hope of achieving greater long-term returns. But if you need to access some, or all, of your money in the near term – for example – if you’re taking an income from your retirement savings – you’re likely to be more concerned about short-term falls.


Once you know your investment needs, the next step is to find the funds that best match them. Investing in a mix of different funds will mean you aren’t relying on the success of one region or investment type alone.


Fund factsheets and Key Investor Information Documents are a great place to start to find out about each fund. They'll tell you everything from what type of fund it is, how it's managed, its past performance and how much risk it takes. You can read these on your customer dashboard by selecting the fund you're interested in.


Please remember that the value of investments can fall as well as rise and you could get back less than you invest. So, if you’re at all unsure about what to invest in or would like to talk it through, you should get some financial advice or guidance.

The risk and reward trade-off

Investing is all about finding the balance that’s right for you. This will depend on lots of things like your attitude to risk, any savings you already have, the level of return you're looking for and the length of time you have to invest.

Can anyone invest?

Yes, investing can be for suitable for anyone, if you decide it’s right for your financial circumstances. In fact, if you’re in a company pension scheme, chances are you’re invested already. You don’t need a big lump sum to get started, any money you can invest regularly will give your savings a chance to grow over time.

The key is to keep an appropriate amount of savings in cash for emergencies and for your day-to-day expenses – enough to cover your bills for at least three to six months. If you’re unsure whether investing is right for you, we recommend you speak to a financial adviser – there may be a charge for this advice. If you don't have a financial adviser, you can access help to find the right one for you by visiting MoneyHelper.

Cover the basics

Build your financial knowledge and get familiar with the basics.