Aviva’s essential guide to investing

Investment returns are the money you earn or lose from putting your money into something like:

• shares (equities)
• bonds
• property
• savings accounts.

Different types of returns

Investment returns are made in a few different ways:

• Growth – This is when your investment increases over time. For example, if you buy shares in a company and their stock price rises, you’ll have made a return through capital growth.
• Dividends – These payments are made by companies to its shareholders, usually when they’ve made profits. However, not all stocks pay dividends, but those that do can provide a steady income stream.
• Interest – This is common with savings accounts, bonds, or fixed-income investments. They will give you a percentage of your investment as income over time.

These are then categorised in three different ways:

• Capital gains – Profits made when you sell an asset for more than you paid for it.
• Income returns – Regular earnings from your investments, like dividends or interest payments.
• Total return – This is a combination of both capital gains and income returns, giving a complete picture of how much you’ve earned from your investments.

There are various types of investment returns, each with their own considerations. It’s important to understand how different returns can impact your overall financial goals.

How are investment returns measured?

Understanding how your investment returns are measured can help you compare options and track performance over time. Typically, they’re calculated in these three ways:

• Annual return – This will show how much your investment has grown or shrunk over the course of a year. It will usually be expressed as a percentage and will help you understand your year-on-year performance. For example, if you invested £1,000 and it grew to £1,100, your annual return would be 10%.
• Yield – Your yield refers to the income you’ve generated from investments, these will be your dividends from shares or interest from bonds, again shown as a percentage of the investments value. It can be a useful way to measure your investments if you’re more focused on the income you could make, and how much cash flow you could expect.
• Total return – This is a combination of both your capital growth and income to give you a complete picture as to how your investment has performed. This can be especially useful for comparing your investments with different income and growth profiles.

What affects investment performance?

There are many things that can affect the performance of your investments, some can be semi-predictable, others can be entirely out of the blue.

The general state of the markets can make a huge impact on the performance of your investments. Changes in things like interest rates, inflation, or the economy can affect how much your investment might make.

Your stocks can also be affected by company news, whether it’s profit results, the launch of new products, or changes in leadership, all can influence performance.

Global events can also significantly impact investments have widespread impact on investments even if you’re not invested in assets that you wouldn’t think would be directly impacted. Global events like wars or pandemics can cause markets to rise or fall.

But, overall, the type of asset, sector, and the geographic region your investments sit in can play a role in how it may perform over time. But trying to diversify across all areas can help balance your risk and returns.

Managing your investment risk can feel like a losing game as there’s only so much you can do. Although you can’t fully shield yourself from risk there are a few steps you can take to manage it:

1. Diversify, diversify, diversify
   We’ve talked about it a lot in this guide, but spreading your assets out across different classes, sectors, and geographies can help ensure some of your investments are working while others might not be performing well.
2. Play the long game
   Investing, a lot of the time, is for the long-term. It’s not about quick wins or overnight success; it’s about letting your money grow steadily over time. By staying invested and not reacting to every market dip, you give your investments time to benefit from compound growth. Patience is key, and consistency often beats trying to time the market.
3. The 2 R’s – Review and rebalance
   Keeping an eye on your investments is important, as over time your portfolio may drift away from its original goals. That’s why reviewing your investments is good as you’ll know where to rebalance if needed.
   Rebalancing your investment essentially means adjusting the proportions of your assets to keep a mix that’s right for you. For example, if stocks have grown a lot, they might now make up too much of your portfolio. Rebalancing helps keep things balanced and on track.

There are many different categories of investments, called ‘assets’. These are all the types of investments on offer and they’ll have different levels of risk.

Cash/Money markets

Cash/money market funds are commonly a low-risk investment designed to allow people to hold cash while still hopefully earning a return. They invest in things like government bonds and short-term loans from banks and companies. Their aim is to give a return that’s slightly higher than you could get from a high street bank. They also don’t last long, which can help keep your money safe and easy to access.

Equities/Shares/Stocks

You might have heard the terms equities, shares, and stocks used interchangeably, and while they’re closely related, they each have slightly different meanings. All of them involve owning a part of a company, but here’s how they differ:

• Stocks are generally referred to as holding portions of ownership of multiple companies.
• Shares will be the units of ownership in the company. For example, you could say that you own three shares in Aviva.

Bonds/Fixed interest

Government bonds and corporate bonds are examples of fixed interest assets; UK government bonds are also referred to as gilts.

Government bonds work like IOUs: investors lend money to the government, the government typically pay a regular income and you receive the full value of the bond, when it comes to the end of its lifetime. There is a level of risk to this type of investment as things like a change of interest rate or inflation can have an impact on the bond's value. There’s also the risk that the bond issuer might not be able to pay you back, known as default risk. This is a bigger risk with corporate bonds which are issued by companies.

Property

Property investments usually refer to commercial properties, so things like shops, offices or warehouses. There are usually two components to investing in commercial properties, the value of the property itself and the rental income that is received from the tenants.

Commercial property can also come with risks as it can have heavy falls and sharp increases in value. It can also be more difficult to sell as it takes time for property purchases to be completed, and you therefore can’t access the money from the property.

Emerging markets

Emerging markets refer to investing into developing countries. They can offer high growth but that does often come with higher risk as you can be exposed to any political or economic unrest affecting the performance of your investment.

Exchange-traded fund (ETF)

There are two types of ETF, passive and active. Passive ETFs are a type of investment that tracks the performance of an underlying group of investments like the S&P 500 Index, which is the benchmark for the performance of the largest 500 public companies in the US. In actively managed ETFs, specialists select investments for the funds, with the aim to outperform the benchmark. ETFs can also be traded throughout the day.

You can find out more about ETFs and how they work in our article.

There are many different ways you can invest, from ISAs and pensions to general investing accounts there could be a product out there for you. Each product will work slightly differently, with different rules that you might have to follow, as well as different types of investments.

Tax benefits are subject to change and depend on the individual’s circumstance.

Stocks and shares ISA

A stocks and shares ISA is a type of investment product that allows you to save up to £20,000 a year. You can use this allowance across as many stocks and shares or, cash ISAs as you like. ISAs are free from income tax and capital gains tax meaning it can be a perfect fit if you’re looking for medium to long term investing. 

Stocks and shares ISAs also have a wide variety of investment options within them, from shares to certain ETFs you’ll have your pick to make your portfolio perfect for you. Some providers may also offer ready-made funds, which can be great if you’re a beginner. 

If you’re not sure whether an ISA is for you, try out our calculator to see how much your investments could grow.

General investing account

A general investment account is a great option if you’re wanting to invest without any annual limits or allowances. It gives you the flexibility to buy and sell as often as you like, and for as long as you like as there are no age limits as to when you have to take your money. Generally, they are designed for long-term goals, so you should plan to be investing for five years or longer.

Something worth noting about these products are that there are no tax perks and when you sell, you may have to pay capital gains tax on your profits. You may also have to pay tax on any dividend income.

Similar to ISAs they have a wide range of investment opportunity, and some providers offer ready-made funds that you can match to your risk profile and goals.

Pension

Pensions are a long-term investment designed to help you save for your retirement. You’re able to start withdrawing from a pension from age 55 (57 from April 2028). But you don’t necessarily have to be retired to do so. There are two main categories of pension, defined benefit and defined contribution.

Defined benefit or final salary pensions are not very common, and you can only get them through your workplace. They provide an income based on your salary and how long you’ve been in the scheme. This income is paid to you and may also be paid to a beneficiary when you die. They usually come with special benefits like protected retirement age or guaranteed minimum pensions. They do have some drawbacks, as there isn’t much flexibility, the benefits are fixed by the scheme rules. This means you won’t have the same range of options you’d get with a defined contribution pension, particularly when it comes to death benefits.

Defined contribution pensions are the most common, they’re split between personal pensions and workplace pensions. Each work similarly with both allowing you to choose how you would like to take your money. Similarly to other investment products you’ll have a wide variety of investment options from the get-go if you’re invested in a self-invested personal pension. If you have a workplace pension, your investment options might be more limited, as in a lot of cases you’ll be put into a default fund initially and then given the option to choose different funds later on.

When you decide to take money from your pension, you’ll have to pick from a set number of options. In the first instance, you’re normally able to take up to 25% of your pot tax-free and then decide after that. Then in most cases, you'll be able to take a taxable income in the following ways:

• Take an annuity. You’ll purchase the annuity with your pension value and will be paid a regular income for the rest of your life.
• Go for drawdown. Drawdown gives you the flexibility to take regular income, or lump sums here and there, meaning you can still benefit from any increases in the market. You can take income as and when you need it. Until you do, your pension can remain invested, and benefit from potential growth that is free from income and corporation taxes.
• Take a cash lump sum – You can decide to take your pension all at once in cash and use it as you wish.  But you need to be aware of the risks of this, such as paying more tax and running out of money later on.
• Take a mix. Some pensions might allow you to take a mix of different options, you might choose to get an annuity for regular income and then use drawdown to get lump sums as and when.

You don't have to take money from your pension as soon as you reach retirement age, you could choose to leave it. Most pensions allow you to stay invested until you hit 75, meaning you can continue paying in and receiving tax-relief up until then, as well as benefit from potential growth that is free from income and corporation taxes.

There are many benefits to a pension in that on top of any personal contributions you make you'll receive tax-relief from the government, if you’re in a Relief at Source pension scheme (RAS). This currently sits at 20%, so if you’re paying £20 a month into your pension, you’ll receive an additional £5 in tax relief. If you pay a higher rate of tax, you may be able to get additional tax relief for the contributions you make. You will need to claim this from HMRC.

If you’re not in a RAS scheme, then tax relief will be at your marginal rate and will be given but not directly into your pension. If you have a workplace pension, you’ll also benefit from any payments your employer makes into your pension. In some cases, they may match your payments or even pay more in than you.

On the flip side, pensions do have their limitations, as you’re unable to take the money out when you like, and there’s a cap as to how much you can pay in across all of your pensions called an annual allowance (up to £60,000 for the 2025/26 tax year or your earnings if less).

Accessing the investment market is easier than ever, thanks to the wide range of platforms, apps and even financial advice. Whether you’re an experienced investor or a complete beginner, choosing the right method will depend on your goals, confidence, and how hands-on you want to be.

How to access the market

There are three main ways you can access the market:

• Online investment platforms – Places like us! Providers will allow you to buy and manage your investments directly. Some might also hold all of the products you need allowing you a one stop shop for all your investing needs.
• Mobile investing apps – These platforms are designed for ease and on the go, allowing you to invest from home, the tube and even the gym. You’re able to track your performance and make decisions, no matter where you are.
• Financial advisers – If you’d prefer expert guidance, financial advisers can help you build and manage a portfolio tailored to your goals. They can also take care of the day‑to‑day management, giving you more time to focus on the things you enjoy.

Charges and fees

Different platforms and methods will have different fees, such as account charges, trading fees, or fund management cost. Some might even require you to have a minimum base investment to even be able to use them, while others will let you start off with nothing. You should always consider these things as well as ease of use when starting out in the world of investing. 

Tax-efficient accounts can help you keep more of your returns. These accounts are often called tax wrappers and are designed to protect your investments from certain taxes, making them a smart part of any long-term investing strategy.

Stocks and shares ISAs allow you to invest in funds, shares and bonds without paying tax on any gains, dividends, or interest that you’ve earned. You’re able to invest up to £20,000 per tax year, and all of your returns are tax-free.

Pensions are considered tax efficient, as your investments grow free from income and capital gains tax. You also receive tax relief on your contributions, making pensions one of the most efficient ways to save for retirement.

Find out more about creating a tax-efficient investment portfolio in our article.

Getting started on your investing journey doesn’t have to be complicated. With the right approach, even beginners can build a solid foundation for long-term financial growth.  Let’s break this down to a beginners guide to investing:

1. Set your goals
   Think about why you’re investing, is it for retirement, buying a home, or building your overall wealth? Your goals will help shape your strategy and risk level.
2. Choose an investment account
   Decide what is the most suitable account for your goals, and whether you need more than one to get you to where you want to be. These accounts will also act as wrappers for your investments and may offer you tax benefits.
3. Select your investments
   Choose what you want to invest in, whether it’s stocks, bonds, ETFs or mutual funds. Make sure you diversify your account to help manage your portfolio.
4. Monitor your progress
   Keep an eye on how your investments are performing. Review and rebalance your portfolio regularly to stay aligned with your goals.
5. Start with what you can afford
   Many platforms let you start investing with just £1, so you don’t need a large lump sum. The key is consistency, investing regularly can lead to significant growth over time.

Common mistakes to avoid when investing

Even experienced investors can make mistakes, as nobody has a crystal ball to tell the future. If you're just starting out, you'll need to be aware of the pitfalls of investing:

• Chasing high returns – It can be tempting to invest in something just because it’s doing well right now. But chasing performance can lead to poor timing and unneeded risk.
• Lack of diversification – Putting all of your money into one company or asset type increases risk of loss. A well-diversified portfolio spreads your investments across different sectors and regions to reduce potential losses.
• Ignoring fees – Investment fees, like platform charges and fund management costs can eat into your returns over time, so you should always check the fee structures before considering investing with a platform.
• Trying to time the market – Predicting when to buy and sell is extremely difficult, even for professionals. A long-term approach with regular investing often works better than trying to guess market movements.

Avoiding these mistakes is a key part of any beginners guide to investing, helping you build confidence and make informed choices.

Investing red flags

While investing can help grow your money, it’s important to watch out for warning signs that could lead to scams or unnecessary risks. Here’s a few of our red flags to be aware of:

• Promises of guaranteed high returns – There is no such thing as risk-free investing. If anyone is promising you high returns with little or no risk, it’s often too good to be true.
• Lack of regulation – You should always check that the platform or adviser you’re planning on using is regulated by the Financial Conduct Authority, as unregulated advice might not offer you the same level of protection if anything goes wrong.
• Pressure to act fast – If you’re being rushed into making an investment decision, the best thing you can do is take a step back. Scammers will often use urgency to stop you from thinking things through.
• Unclear or hidden fees – If cost isn’t clearly displayed or explained, or you’re unsure how much you’ll be charged, that’s a red flag. Transparent pricing is essential as unexpected fees can quietly reduce your returns over time.

Knowing when to seek financial advice can make a big difference in your investment journey. While many people start with simple tools and platforms, professional guidance can be especially helpful in more complex situations.

Financial advice can help if:

• you’re investing large sums of money
• you have complex financial goals, like retirement planning or inheritance strategies
• you’re unsure how to build a portfolio that matches your risk level and timeline
• you want a hands-off approach to investing

Something worth noting is the difference between advice and guidance as you may be offered both.

• Guidance offers general information to help you make decisions. It doesn’t take into account your personal circumstances and the person giving you guidance can’t tell you what to do. 
• Regulated advice will be tailored to your personal situation and will be provided by a qualified adviser. It will also come with protection and accountability under UK financial regulations.

If you think advice might be for you and you’re not sure where to get started, why not try us! If you have pension or investment savings of £300,000 or more, we might be able to help. We’ll give you a personal plan that’s built around your goals, and you can start with a free no-obligation chat with our Customer Wealth Engagement team to see if advice might be right for you.

If not, you can also try unbiased.co.uk to help, find a regulated financial adviser in your local area.

Investing is a journey, not a race. There’s not a one-size-fits-all approach, and no perfect moment to begin, just the decision to take that first step.

The most important part is to make sure you’re doing it at your own pace and setting clear goals to get you going.

You don’t need to know everything to begin, you just need to begin. With the right tools, support, and mindset, investing can become a powerful part of your financial journey.