How to choose your first investment

Find out some ideas for your first investment and what to consider.

You’ve decided you’d like to start investing, you’ve got yourself a handy share-trading app and you’re ready to go, but what do you invest in? Some platforms have more than 6,000 investments to choose between, so it can be a little daunting trying to choose just one of them to start creating a portfolio. Here’s how to narrow down your choices.

Don’t put too much pressure on your first investment

Like many first-times, your first investment doesn’t need to blow your socks off. Choose something that you think you’d like to buy and invest a small amount into it — the idea is to fully grasp the options that will come up when you buy and sell and understand what they all mean.

Try to understand the order types, but leave them alone for now

There are a few different types of order. For your first investment, it’s a good idea to place a basic order. Once you’ve given it a go, you can read about the different types of order and fully understand how they work.

If you want to try out these order types, you could look at platforms with a demo account (we love eToro and Trading 212’s demo accounts). These let you invest with virtual funds and they mimic the real movements in the market.

If you’d like to read more about order types, we’ve explained them in step 4 of our investing for beginners guide — you’ll need to expand the “jargon explained” section.

Ideas for your first investment

There are loads of different companies and investment types that you can choose between. Here are some ideas for choosing your first investment:

Choose a company you know (and love!)

This is pretty simple — look around you. The company that makes your phone, your favourite cereal, your hair products, your car, your morning coffee stop — it’s likely that a lot of these are publicly traded or owned by a publicly traded company. Your first investment could be one of these. It doesn’t have to be a lot of money and you certainly don’t have to hold it for very long, but it gets your foot through the door.

Building a portfolio of these types of stocks can help you align your investments with your values — for example, if you don’t like to contribute to animal testing, the chances are that you’ve researched products you use to find out if the companies test on animals. If you stop liking what a company is doing, you’ll stop using its products and stop investing in it.

Invest in a fund or exchange-traded fund (ETF)

This sounds a lot more complicated than it really is. A fund is a collection of investments, sometimes based on the sector they’re in, the country they’re based in, company size or how they score ethically.

Exchange-traded funds are simply funds that are listed on stock exchanges. You could choose a fund or ETF in a sector you love, like technology or farming, or you could choose one that aligns with your values, like a vegan or climate focused ETFs.

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If you’re still not sure, consider a ready-made option

Ready-made portfolios are offered by robo-advisors and some share-dealing platforms. They’re similar to funds, except they’re really well diversified, so you don’t need to choose more than one, and they’re fully managed. You often choose these based on how you feel about risk. You could invest in ready-made portfolios as well as purchase a few shares.

Can I add cryptocurrencies to my portfolio?

*Cryptocurrencies aren't regulated in the UK and there's no protection from the Financial Ombudsman or the Financial Services Compensation Scheme. Your capital is at risk. Capital gains tax on profits may apply.

Cryptocurrencies are speculative and investing in them involves significant risks - they're highly volatile, vulnerable to hacking and sensitive to secondary activity. The value of investments can fall as well as rise and you may get back less than you invested. Past performance is no guarantee of future results. This content shouldn't be interpreted as a recommendation to invest. Before you invest, you should get advice and decide whether the potential return outweighs the risks. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Cryptocurrencies are a slightly different type of investment. They’re forms of currency that’s “decentralised”, which means that no individual or organisation has control or can make decisions. Instead, this is done with a distributed network. You’re able to invest in cryptocurrencies as part of your portfolio, but it may be held in a different account or investment provider, unless your chosen provider lets you buy crypto assets. There are some things you’ll want to consider if you plan to put cryptocurrencies into your portfolio:

  • Cryptocurrencies are a lot riskier than traditional shares. They also tend to be quite volatile. If you’re nervous about risk, it’s best to steer clear of them.
  • You’re currently unable to put cryptocurrencies into an individual savings account (ISA). You might need to hold your cryptocurrencies separately and may be liable to pay capital gains tax on any profits you make when you sell.
  • Cryptocurrencies aren’t fully regulated by the Financial Conduct Authority (FCA). You’re unlikely to be covered by the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman Service if something were to go wrong.

We have a full guide on cryptocurrencies if you want to learn more.

Why can’t I invest in my chosen company?

There are a few reasons why a company doesn’t come up when you search it within your chosen app.

  1. The app doesn’t have the share you want. Some platforms simply don’t have the share that you want to invest in, particularly if it’s a lesser known company or it recently floated on an exchange, known as an initial public offering (IPO). Check which stock exchange it is listed on and that your provider offers these. Sometimes you can make a request to your provider for a specific stock.
  2. Your chosen company isn’t listed on an exchange. If you’ve opted to invest in your favourite local coffee shop but can’t find it in the app, it might simply be because the company hasn’t floated on an exchange. There’s not much you can do about this other than keep an eye on whether it IPOs.
  3. You haven’t given your provider relevant information. Some providers will limit your access to US stocks until you’ve filled out your W-8BEN form with them. Have a poke around in your settings to check that you’ve given the provider everything it needs.

What’s next?

Now you’ve chosen an investment, you can make an order. With most investment platforms this can be pretty straightforward, but with platforms that have more on offer, it might not be so simple.

Look out for a “basic order” or a “market order”. Our guide on how to buy shares gives more detail on the process.

All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

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