Xela Finance

Young people often want to know what steps they should take to get into the stock market, but it may seem a bit daunting or confusing, so they never do it. In reality, it’s really straightforward and actually pretty fun. My plan for this post is to make it as simple as possible for you to understand how to invest in the stock market.

First, you need to find a broker that you like. The broker I use is Trading212 (they don’t sponsor me but I wish they did!) because they offer commission-free trading (no ‘broker fees’), and their platform is the easiest to use and understand that I’ve tried (compared to 6 others). I’d recommend using their mobile app over the website – it’s much cleaner and more convenient. 

If you want to set up a Trading212 account, it’s easy to do so. Sign up by following this link (http://www.trading212.com/invite/4KBCADM) and when you deposit a minimum of £1, you’ll get a FREE SHARE potentially worth up to £100. Just note: if you don’t use this link to sign up, you won’t get your free share! 

There are 3 types of accounts you can open. Firstly, CFD (Contract For Difference): this is for commodities trading and FOREX, which is slightly more complex than the other two, so I don’t bother with it. Second, the INVEST account, which is a standard trading account where you can invest in 1000s of companies and bonds. Finally, the ISA – this is the same as the normal INVEST account, but it’s in an ISA, so you can invest £20,000 tax free. As an example; if you invest £20,000 and get a return of 40% (£8,000), you won’t pay any tax on that £8,000. Personally, I think setting up the ISA account makes the most sense. 

Once you’ve got your ISA account funded (should be fairly simple – just hit ‘Deposit Funds’), you are free to invest. This is where most people get stuck, and don’t really know what to do. The answer is: you can do whatever you want! You can invest in companies that you like – maybe Apple or Aston Martin – or companies you use a lot, like Netflix or Facebook. I always say time in the market is more important than anything else, so as long as the company is well known and fundamentally strong, it doesn’t really matter who it is. However, if you want a little bit of strategy, I’ll let you in on what I do. 

In my ISA, I predominantly invest in 5 different equities. The first one is an ETF (Exchange Traded Fund) – these are pretty cool because they’re basically funds that let you invest in numerous companies, but they behave and operate as normal shares of a single company. One ETF I have in particular is the FTSE 250, a fund that owns a little bit of the 250 biggest companies in the UK (after the FTSE 100). By investing in it, you’re investing in each of those 250 companies. It’s a fairly low risk option, but has a lot of growth potential. You can find it by its ticker symbol – MIDD. The next ETF I have is an S&P 500 ETF (IUSA), which is similar to the FTSE 250 ETF, but it focuses on the 500 largest companies in the US instead. Next, I have a company called Realty Income (O), focusing on commercial and retail real estate in the US. I like this one a lot, because it pays monthly dividends. This means that you’ll get paid just for owning shares of the company. Fourth, I have shares in Tri-Tax Big Box (BBOX), who operate in the UK and Europe, and they own warehouses which they rent out to big companies like Amazon, so it’s a good shout. The last equity I invest in is the iShares UK dividend ETF (IUKD), an ETF that holds UK companies which pay big dividends. Since COVID, they have fallen by about 20%, and I think this could be quite the profitable investment in the long-term. 

Armed with these 5 equities, I use the ‘Pie’ function in Trading212 to allocate a specific weighting (percentage of my overall invested funds) to each one. An equal weight allocation works well. This function aims to reduce risk via diversification, but as we have 3 ETFs it is already well-diversified before putting it into the Pie. The addition of the Pie function just makes everything a little safer and simpler. 

Once the Pie is created, it asks if you want to invest manually or automatically. With manual investing, you invest however much you want, whenever you want, whereas with automatic investing you can set it up to invest a certain amount of money on a certain date, this can be done weekly, fortnightly, or monthly. I use the automatic function because it’s an easy way to keep investing without having to put any effort in – I also reinvest any dividends I receive so I can get that compound interest working for me. Now that the pie is set up, there’s not much you have to do – just keep monitoring it every now and then.

If you’re at all confused by Trading212, it does have a ‘practice’ function, so you can get to grips with what everything means and does without making any mistakes.

It’s a great position to be in, being invested at a young age, so good luck everyone! Get in touch on Instagram (@xelafinance) for more tips, help, and advice – or if you get stuck!

Remember this is not financial advice, these are my thoughts and opinions.