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We have put this ISA guide together to help you with learning about ISAs and specifically a Stocks and Shares ISA on The Big Exchange. This is not personal advice and if you’re not sure if a particular investment is right for you, please seek independent financial advice.

How to get into investing?

We know that starting to invest can feel daunting. But it doesn't have to be. Most of us just want to know that we are not doing something foolish and that we're making an educated decision. So, while we can't provide you with advice, we can give you some useful insights to help provide you with the support you need to feel confident when investing.

What is investing?

Investing is the act of buying into assets such as funds or anything where the value can go up (or down) over time. The expectation is that over time, that asset will increase in value and make more money over time although this is not guaranteed.

Impact investing is when your expectations are not just set on trying to increase financial value i.e. to make money, but also trying to make a measurable positive social or environmental difference through your investments as well.

Why do people invest?

There are a number of reasons why people invest, but we've simplified it down to the two reasons that are most common: to build some wealth and to counter inflation. Expand the cards to see more information.

Before you invest

Investing means you are putting your money to work. It's a bit like exercise in the sense that in order to see any potential results, you have to commit to it for a long time and there may be ups and downs throughout the process. So before you get going, here are some simple things to consider before investing:

Know what you can afford to invest

Investing is not guaranteed to make you money. This means that at any time the value of your investments can go down. Make sure you are not investing money you rely on for day-to-day life or that you'll need in cash soon.

Pay off any expensive debt first

Any debt you have on things like credit cards, overdrafts and short-term loans could cost you more than investing might make you. Look into paying this down first before investing.
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Set your expectations into the long term

Anyone that tells you that you'll make money overnight is lying. Set a long term goal and don’t tinker too much - especially when markets look rocky. Usually, the longer you leave your money invested, the better.

Read about the importance of strong financial foundations

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How does investing work?

A key principle to understand about investing is the trade-off between risk and return. This means that lower risk investments generally means lower returns over an extended period, whereas higher risk investments usually means the potential for higher returns (and the higher chance of larger losses). There are 4 key things about risk we think every investor should know.

Risk tolerance

This is how much risk you are comfortable to take. If you're watching your investments and panicking constantly about what's happening or what might happen, then you've probably overstretched your risk tolerance.

Each person's risk tolerance is unique and it's up to you to decide how much you feel you can take.

Risk capacity

This is working out how much you can afford to lose. Now this sounds pessimistic, but in taking a risk you are implicitly agreeing to the fact that the opposite could happen to what you expect and you could lose money.

Every investor should think about what they could afford to lose before investing.

Time horizon

If you’re investing for a long period of time, you may be more likely to take on more risk in the hope of getting higher returns, that's because you’ve got more time to recover from any short term downturns or fluctuations in the market.

If you know you will need your money within 3 years, it's best to hold it in cash.

Knowledge

Financially savvy and experienced people are generally more comfortable with taking appropriate investment risk. When the trade-off between risk and return is better understood you are more prepared for the experiences of investing.

If you're new to investing it might be useful to try with a smaller amount to get a better understanding first before committing further.

Choosing what to invest in

On The Big Exchange, you can invest in funds. A fund is an investment vehicle consisting of individual investments made by an investment manager. A fund is invested in line with a strategy and may contain: stocks, bonds, or other securities. Funds are run or managed by a professional money manager.

Investing in a fund is usually considered a less risky route into investing compared to buying individual shares of a company, where you hold the risk of only one company. When choosing a fund, an expert investment team try to meet the fund's objective through managing risk, choosing the holdings, and building a diversified portfolio.

Benefits of investing in a fund
Diversification. Funds can invest in many different assets and they can give you an easy way to diversify your portfolio.
Cost effective. You can get access to a wide array of companies and exposure without having to take on all the trading costs purchasing each company individually.
Expertly managed. Funds are overseen by fund managers and teams. It is their job to make sure they meet the performance and impact objectives. They worry about the trades so you don't have to!

Misconceptions about fund investing

Most people can conjure up a stereotypical image of who or what an investor is. Maybe it's suits, ties, and mahogany tables or maybe it is something else.

But whatever it may be, we want to challenge those stereotypes and show that being an investor doesn't mean you need to fit into a certain type. We want investing to be accessible, open, and transparent. But to do that, we have to break down some barriers and highlight some misconceptions first!

You need to be rich

We want to make investing accessible. You can start from £25 a month and we only work with fund manager partners who agree to allow these minimum amounts.

You need to time the market

Financial markets go through ups and downs. When you're investing in a fund, the fund manager is overseeing a portfolio of investments. It is their job to know when to buy and sell to meet the fund's objective.

You need to keep up with the all the news

This is not true. While it is always good to be informed, your investments should be made dependent on your long term goals. Our blog is a good place to get perspective and help stay well informed.

Sacrificing return for impact

We don't believe choosing to have social and environmental objectives alongside financial ones means you give up returns. In fact, research has shown that in certain market conditions, sustainable investments have been more likely to outperform equivalent investments.

Asset classes explained

An asset class is a grouping of investments based on shared behaviours, characteristics, and rules. The easiest type of asset class for most of us to understand is cash. Funds on The Big Exchange usually invest in one type of asset class stated in their strategy - we've explained the three main ones below:

Equity funds

Equity funds invest in companies that usually trade on stock markets. They do this by investing in the shares of different companies. If a fund holds equity then the fund owns some of that company. Funds will buy or sell shares on global and/or regional stock markets.

Fixed Income funds

Fixed income funds usually invest in bonds, debt, or other similar assets that provide a fixed, regular return (a bit like a loan). In normal market conditions, fixed income investments like bonds are understood to carry less risk than equities.

Multi-Asset funds

Multi-asset funds are built to deliver their objective by investing in a mix of different assets: shares, bonds, cash, property etc. A multi-asset fund is managed flexibly and the risk the fund is taking can be adjusted by the fund manager on an ongoing basis.

See our full fund list

When investing your capital is at risk

Active vs Passive

When researching investing you may hear people using these two words to describe their approach to investing. Active and Passive are two styles of investing which have different pros and cons. We currently only list Active funds on The Big Exchange as we believe it takes engagement and stock selection in order to create credible positive impact on people and the planet. You can read more about our impact methodology here.

Active investing

Active investment management aims to outperform the market and is driven by real people doing the work. Active managers analyse the market to identify investments that they believe have the best opportunity for growth (and for funds on The Big Exchange, that fit within their sustainable or impact objectives). Active management typically requires an investment manager or team to continuously review, analyse and trade the investments and report against the given objectives.
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Passive investing

Passive investment management mimics an index of market returns, and does not require a manager to buy and sell at will - it is often based off of computer models. Passive investing is currently not available on The Big Exchange as we want to fully understand the way in which a passive managed fund can make a positive impact on people and the planet. A Passive fund's objective is often to mimic the market and it can introduce screens (to avoid harmful companies) or a "tilt" (to focus on higher sustainability scored companies within an index).

Learn how to grow your money free of tax with our jargon-free ISA Guide