If you're new to investing – or just refreshing your memory – the world of stocks, shares and markets can seem daunting.
But placing your money in an investments product (rather than a straightforward savings account) could have significant benefits if you're looking to grow your finances.
Here are a few things to consider to help you get started.
Growth or income?
Some investment funds aim to grow the value of your original investment (though this is never guaranteed and the value can also go down). Others aim to generate an income by receiving dividends from the companies they invest in.
Thinking about whether you want to accumulate a lump sum or you want to provide yourself with an income is a good place to start.
Passive or active?
This is all about how involved you want to be in the management of your investments – and how diverse you want your investments to be.
Unit trusts, OEICs, investment trusts and REITs are usually managed by a fund manager who makes investing decisions on your behald. These are active investments.
Passive investments like tracker funds don't have a fund manager and make or lose money by following a particular market automatically. Because they don't require active management, charges are usually lower for passive investments.
High risk or low risk?
Your appetite to risk is one of the key decision-making points when starting to invest. And the level of risk you can take on often depends on your circumstances (and how much you could afford to lose).
In general, the longer you can leave the money invested for, the more risk you can take, as you'll have more time to make your money back.
Types of investment
Unit trusts and OEICs
These are open-ended investment funds, meaning that they will always accept more cash from investors – they just become bigger to accommodate the demand. Investors own 'units' of the fund, and the number of units can change. These are actively managed by a fund manager.
These are closed-ended, meaning they have a fixed number of shares that are traded on the stock market, and can go up and down in value. These are also actively managed.
Real estate investment trusts (REITs) are investment trusts that only invest in the property asset class.
A tracker fund invests in all companies in a particular market (eg the FTSE 100) and so rises when that index rises (and falls when it falls). As there are no investment decisions to make, this is considered a type of passive investment, and a low cost and simple way to start investing.
As with tracker funds, an exchange-traded fund (ETF) usually tracks an index, such as a stock index or bond index. It is different from a tracker fund because it's traded on the stock market, so shares can be bought and sold throughout the day.
The most tax-efficient way to put your money into any of these investment products is through a stocks & shares ISA. If you've already used your full ISA allowance for this year, an investment account would be your next step.