Investing in stocks as a beginner UK – Step by Step Process

Investing in stocks as a beginner in the UK has never been more accessible to the retail investor (you and me) than in 2020.  Read on to discover exactly how easy investing can be…

Lady investing on laptop

Investing in the stock market has time and again been an excellent strategy to make money particularly over the long term.  Buying stocks gives investors the opportunity to enjoy the rewards of investing in successful businesses.  You don’t have to be the next Warren Buffett to grow your wealth by investing in stocks!

1. Why do you want to invest?

We all want to increase our wealth and boost our finances through investing in stocks. However, it’s important to understand that investing is not a get rich scheme. Unless you’re incredibly lucky or incredibly gifted at predicting the future then you’re unlikely to make millions overnight investing. When investing in stocks, you’re also investing your time and future earnings on the choices you make now. When investing in stocks as a beginner in the UK, I personally look for good businesses. These are companies that I understand, believe in and have a strong balance sheet. These are just some of the basic starter points to consider when investing in stocks as a beginner.

2. What is your goal?

Jumping at sunrise

When investing in stocks you should have a goal in mind, both in terms of the period time you want to be invested and a realistic financial target.  Keep in mind that investing should only really be considered if you’re in it for the long-term (minimum 5 years).  This allows for the greater chance of gains to compound over time and to enable you to ride out the inevitable bumps along the way.  Deciding how much and how often you are going to invest will have a huge impact on your returns.  Just remember to invest only what you can afford and seek independent financial advice tailored to your specific financial circumstances.

3. Passive or Active Investor

As a beginner in the stock investment world you might feel a little intimidated or overwhelmed at all the research and potential extra risk that comes with being responsible for picking your own stocks.  If this is you, don’t worry and don’t give up on the idea of investing.  There are a number of alternative options available to you.  Once you have a bit more experience and knowledge in stock investing you might choose to begin dabbling in individual stock purchases.  One option available is looking at Index Funds, Mutual Funds or Exchange Traded Funds;

Index Funds/ETFs

An index fund and or ETF is a portfolio of stocks that has been picked to track and mirror the performance of a market index such as the FTSE100 or S&P500.  Index funds and ETFs are a great way to invest in stocks for beginners as they ‘re both low cost in terms of fees and are passive forms of stock investments.

Mutual Funds

Again, mutual funds hold a basket of stocks, however with mutual funds there comes an added cost in terms of fees.  This due to this type of investment usually being actively managed by a fund manager.  Mutual funds are generally more expensive as a fund manager is attempting to beat the market with his or her stock picks.

Robo investment

This type of investment is even more hands off than either of the options above. A Robo investment is a service provided by an investment platform that picks a basket of stocks/funds on your behalf. This is done by asking you a series of questions that determine what type of investor you are. Your answers are assessed on your level of risk, investment time horizon and your financial situation. A fancy algorithm then assesses all this information and assigns you an appropriate investment.

Individual stocks

Individual stock picking is the most challenging option for the UK investor when investing in stocks as a beginner. It requires time, research and skill to build a balanced portfolio. It can also be more costly depending on the platform you use to invest with. Remember stock picking is not easy, even professional stock pickers often fail to beat the overall market returns. However, investing in individual stocks can be highly rewarding compared to the alternatives. Achieving market beating returns is not only possible but within everyone’s reach with the correct strategy and research.

4. Open an investing account

So, you have decided that investing is right for you and understand the type of investments you want to make. Now all that stands between you and becoming the next ‘Warren Buffett’ is the type of investing account you open. There are many investment brokers out there which are all vying for your money to be invested via their platforms. Deciding which one to go for will largely depend on what type of account you wish to open. For the beginner investor in the UK there are 3 main ways;


A SIPP or self-invested pension plan is a way in which the UK investor can invest in shares, ETF’s etc with the goal of building a portfolio which will grow for retirement.  The main benefit of investing via a SIPP is the tax benefit of 20%.  For example, for every 800 pounds you add to your account the taxman tops up with a further 200 pounds.  Not too shabby!  However, the major drawback of investing in a SIPP is that you can’t access your investments and cash them out until you reach the age of 55.  If you can’t hold out until 55 years old, then perhaps the next two options will provide a better option.

Stocks and Shares ISA

A stock and shares ISA is perhaps the preferred choice for investing in stocks as a beginner in the UK.  Unlike with a SIPP you can access and withdraw your funds at any time (check with your brokerage before signing up).  What makes the stock and shares ISA even more attractive are the tax advantages.  Rest assured that your investments and any profits you make are tax free meaning you’re safe from the taxman.  The only major drawback with a Stocks and Shares ISA is that any money invested counts towards your £20,000 yearly ISA limit.  This is unlikely to be much of drawback for the beginner UK investor; however, it is something to consider if you have a large lump sum to invest.

Dealing account

A dealing account is the third way in which UK investors can start investing in stocks as a beginner. Using this type of investing account, will not restrict how much you’re able to invest. You can also withdraw your funds at any time without restrictions depending on the brokerage used. The major drawback with this option is that your investments are not exempt from tax. Investments in this type of account are subject to both Capital Gains tax and a tax on dividends. A dealing account requires more research to fully understand the extent of the tax implications. For this reason, it is perhaps more tax efficient to opt for a SIPP or Stocks and Shares ISA if that is possible.

5. Focus on the long-term

Money growinh

Now you’ve assessed all your options and decided to invest, reaffirm your original goal to invest for the long-term.  Whether you’ve invested a lump sum or set up regularly monthly investments, it is important not to obsess over daily changes in your balance.  Getting hung up on a balance that swings in the negative or getting overconfident with gains is a key mistake the beginner investor makes.  This can lead to hasty decisions and ultimately a greater risk of losing money.  Instead focus on using your investments to reach your financial goals and boost your finances in the long-term.  Over the long-term the stock market has rewarded investors who stick to a strategy of investing in good companies through the peaks and troughs.

Conclusion – Investing in stocks as a beginner UK

As mentioned, it has never been easier or more accessible for the beginner investor to purchase stocks.  A number of investment platforms offer extremely low entry points meaning the UK investors can begin investing from as little as £1! 

As you begin your investment journey you will learn as you invest.  Continue to expand your knowledge through reading investing books, blogs, news and through your own personal research.  By doing so you will naturally increase your chances of success. Financial security and wealth is being created in the stock market every day, you just need to figure out where to put your money.