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7 questions you must ask before you invest

The thrills and spills of the stock market can be exciting and lucrative, but sometimes it can be hard to know where to start with investments. Ask yourself these 7 questions to work out how and where to invest your money.

What should you consider before you start investing?

There are a dizzying number of investment options out there, and few of us can spare the time to study markets in detail and learn to invest money like a city trader, but that doesn't mean you should give up on the idea!

If you spend just a little time asking yourself our investing FAQs, you'll be able to work out how to invest money in a way that suits your finances.

1. Are you ready to invest?

First of all, it's important to work out if you have enough spare money to invest. When you add up your investment kitty, make sure you're still left with enough money to meet your outgoings as well as a little extra for a rainy day too - preferably held in an account you can access easily.

Aside from the risk that you might lose the money you invest, you'll also have to be prepared to be without the funds for a while. Investing is a mid to long term outlay - with some, there will be restrictions on when you can withdraw your money. Even if there are no restrictions, most investment products perform better over a longer term.

Investing one large lump sum isn't your only option; many investment options will let you pay in each month, so it's worth working out how much you could regularly afford to contribute.

2. Why invest your money?

Interest rates on savings accounts have remained low for years, with plenty accounts not even keeping up with inflation.

Looking for higher returns, many people have tried alternative products like Investment ISAs or share dealing in the hope that they can earn a better income from the dividends paid or the amount the investment's value increases over time.

So if you're not satisfied with the savings rates out there, you'll need to look into the alternatives.

3. How much risk are you willing to take?

The possibility of earning a decent return on your money comes at a cost - the most lucrative investments are also often the riskiest.

While a savings account with a bank or building society will give you back the money you put in as well as interest earned at a steady, agreed rate, investment products rarely guarantee you'll get your capital back, but offer different levels of risk.

Deciding how much risk to take will depend on what sort of returns you expect and whether you can afford to lose the money you're investing if it falls flat - if you can't, make sure you go for a safer bet.

4. How much help and advice do you need?

We're all different - some people prefer to manage their finances independently, wanting to understand every aspect of it and make their own decisions; others would rather pass the responsibility onto an expert in the hope that they'll do a better job and cut out some hard work.

How much help you need will depend on how confident you are handling things yourself, how much time you have spare, how much control you want to keep yourself, and whether you think an expert can make a difference to how well your investments succeed.

Execution only accounts will provide you with a platform to invest and little else. This is useful if you want to save money on fees, but only if you're comfortable being in charge of your investments on your own.

If you do decide to get some advice from an Independent Financial Advisor, try our 5-Step Plan to Finding an IFA You Can Trust with Your Money.

5. How much will investing cost?

Most investments aren't free of fees; their more complicated nature usually means that you'll need to go through an investment company, whose services will cost you money.

Fees are now usually charged upfront, rather than on a commission basis, so you should be able to compare how much each option will cost you more easily. Just don't forget to look into the fees when you consider what product is best for you.

These charges can include management fees for annual administration, a fee for each individual deal or transfer, and an initial deposit fee.

Using an online trading platform can help avoid some of these charges, but doing it this way will mean you're not given advice by brokers.

6. What do you want to invest in?

You don't need to be an expert on every form of investment under the sun - you'll only really need to take a quick look at the investment basics for each option, then research the one you pick in greater detail.

Here's the basic lowdown on some of your main choices, with links to further information for those that take your fancy:

Share dealing

When you buy shares, you can make a profit through the dividends paid by the companies you invest in, or by selling shares on at a higher price than you bought them. You'll need to either trust an expert or learn to invest in the UK stock market yourself. To get started, read our guide, Understanding the Basics of Share Dealing.

Investment trusts

Investment Trusts leave the share dealing to a fund manager - you deposit your money into a fund with other investors, then the manager buys shares in a range of companies. Our guide, Investment Trusts Explained, will tell you more.

Unit trusts

Unit trusts again allow you to invest in a shared pot with others, but they divide the fund into units that represent your stake. The fund is then invested in stocks and shares or debt securities for profit. Read our Unit Trusts Explained guide for more information.


An Open Ended Investment Company allows you to pool your funds with others to invest in a range of companies within a particular market. Our guide, What is an OEIC?, looks into how they work.

Investment ISAs

An Investment ISA is a tax efficient way to tie up your money. As with Cash ISAs, no tax will be deducted, so you can keep more of your profits. There are lots of different types Investment ISAs to choose from; our Investment ISAs guide tells you more.

7. Are there any alternatives to risky investments?

If you're not tempted by some of the riskier options, you might be better off reconsidering the humble savings account.

It's also worth considering a current account too, as some of these offer the highest interest rates on the market; our high interest current accounts comparison highlights the best ones.

Although not risk-free, property is considered to be one of the most stable forms of investment. Our guide, How to Invest in Property, looks into your options in detail.

Paying off existing debts and mortgages can sometimes be the most profitable way to use your money because the interest you pay will be higher than what you could earn from other financial products. Our guide considers, Should I Use My Savings To Pay Off My Debts?