Investing can feel intimidating for all sorts of reasons. You are taking a new step with your savings, and it comes along with a lot of new decisions. But getting started isn’t as overwhelming as it seems on the surface.
Creating a checklist of what you need to consider when you invest can be a helpful step to lay out the process in front of you. Everyone’s criteria and needs will be a little different, but there’s a handful that apply to most people.
Here’s a few things you might want to consider to help you choose the right investment path.
1. What's your investment goal?
Many people find it easier to save and invest regularly when they have a goal in mind. For some, it’s a first home, and for others, it's their children's education. The goal can be anything that you’d like your savings to help you achieve, and it doesn’t need to be the same as those around you. One investing goal I have is taking a trip to Patagonia.
Having that in your mind is great motivation to keep going and gives you a reason to go through the process in the first place. It also can give you an idea of how much you need to save up. For example, I know that factoring in flights and accommodation, I’d need to save around £5,000 to make my Patagonia dreams come true. If you’re choosing to invest, rather than save in cash, using a Stocks and shares ISA can shelter your investments from income and capital gains tax, leaving more money for your goals.
2. What’s your timeline?
Along with having an investment goal, many people have a timeline for when they want to achieve it.
Once you have a timeline established, you can decide how aggressively you’ll need to save and invest to get there. For example, if I wanted to go to Patagonia in 5 years and assumed my investment would make 7% after fees each year, I could use the Stocks and shares ISA calculator to figure out that I would need to put aside about £75 each month. But keep in mind, when you invest in the stock market, the value of your investments can go up as well as down or grow at a different pace. So, this would just be an estimate.
3. How much risk are you comfortable taking?
When you start investing, you’ll have lots of different options. Some tend to have more stable, slow returns, and others have faster growth prospects, but can be rocky along the way. You’ll need to decide what level of risk you’re comfortable with as an investor.
Historically, those who have invested in stocks and shares have generally been rewarded over the long term (and by long term this means decades rather than months or even years). But the price of this is often significant volatility in the short term.
Because of this long-term approach, your risk level may also be dependent on your timeline. For my Patagonia trip in 5 years, I might be a little more hesitant towards risk than a goal that I have 40 years to invest for, like my retirement, because there’s much more time for the market to recover if there was a drop.
4. Do you still have a cash buffer?
Most people that invest still hold some money in cash. This is important because it can act as a safety net if anything goes wrong, like losing a job. Holding at least three months’ worth of fixed expenses in a rainy-day fund can help create a nice buffer and allows a lot of us to sleep more soundly in the meantime.
5. What will you invest in?
Now that we've laid out all the criteria, we can get to the fun bit of choosing an investment. Two of the key things to consider are diversification and price.
Diversification means ensuring that your investments are spread out over different sectors and regions. This can be a big relief if something goes awry in the market, because your investments won’t all be affected in the same way, often making your portfolio more resilient.
Fortunately, we don’t have to do this ourselves. Investors can choose to invest in an index funds, which spreads money across hundreds of different companies. All in one funds are another popular option for investors, because they can hold a mix of different asset types, like bonds and equities, that allow for different levels of risk.
Cost can also be a determining factor. This usually refers to the ongoing charge that comes along with the fund. The larger that charge is, the more it’s eating into your investment return (and in my case, the fewer Argentinian steak dinners I can plan!). More expensive funds don't necessarily mean better performance – keeping costs low can make a meaningful difference to your pot over time.
Hannah Williford: Content Writer
Hannah joined AJ Bell in 2025 as an investment writer. She was previously a journalist at Portfolio Adviser Magazine, reporting on multi-asset, fixed income and equity funds, as well as macroeconomic impacts and regulatory changes...
These articles are for information purposes and should only be used as part of your investment research. They aren't offering financial advice, so please make sure you're comfortable with the risks before investing. Tax benefits depend on your circumstances and tax rules may change.
