Jasmine Birtles
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5 Best Investments for Beginners in the UK 2025
Ruby Layram
27th Feb 2025
Embarking on your investment journey can feel both exciting and a tad overwhelming. With many different options available, it’s essential to identify assets that align with your financial goals and risk tolerance. To help you navigate this landscape, I’ve compiled a list of the top five investment options for beginners in the UK for 2025.
Before you continue reading, it’s important to understand that investing looks different for everyone. You should spend time assessing your individual needs and goals before making any final decisions.
You might also like: How much money do you need to start investing in the UK?
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Gold
Gold has long been revered as a store of value and a hedge against economic uncertainty. Its appeal lies in its intrinsic value and the stability it offers during turbulent times.
There are several reasons why Gold could make a good investment for beginner investors.
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Inflation hedge: Gold often retains its value even when inflation erodes the purchasing power of paper currencies.
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Diversification: Incorporating gold into your portfolio can reduce overall risk, as its performance often inversely correlates with traditional assets like stocks and bonds.
How to invest in gold
There are several different ways that you can invest in gold. The most tax-efficient option is to buy Gold sovereigns, however, it’s helpful to understand the various options that are available.
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Physical gold: Purchasing gold bars or coins allows you to own tangible assets. However, consider storage and insurance costs.
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Gold ETFs: These funds track the price of gold and offer a convenient way to gain exposure without handling physical gold.
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Gold mining stocks: Investing in companies that mine gold can provide leveraged exposure to gold prices.
While gold can be a safe haven, it’s essential to approach it with a balanced perspective. Allocate a portion of your portfolio to gold, but avoid overexposure, as it doesn’t generate income like dividends or interest.
Stocks and Shares ISA
For those looking to dip their toes into the stock market while enjoying tax benefits, a Stocks and Shares ISA is an excellent starting point.
A stocks and shares ISA is a tax-efficient investment account that allows you to invest in a range of assets, including:
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Individual Stocks: Owning shares of companies.
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Bonds: Debt securities issued by corporations or governments.
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Funds: Pooled investments like mutual funds or ETFs.
The main appeal of a stocks and shares ISA is that returns are tax-free (up to £20,000 per year), which has caused them to become known as a ‘tax wrapper’.
Furthermore, many ISA providers offer managed accounts that support a more hands-off approach. This is ideal for beginner investors who may find the process of picking stocks and shares a bit overwhelming.
Investing in the stock market carries inherent risks and the value of your investment could go down. It is important to only invest money that you can afford to lose.
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Bonds
Bonds are debt instruments where you lend money to an issuer (government or corporation) in exchange for regular interest payments and the return of the initial amount that you lent out.
Bonds are considered to be a ‘low risk’ investment option. This means that they tend to be stable however, they may not offer the same growth potential as higher-risk assets.
Types of bonds:
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Government bonds: Issued by the UK government, they are considered low-risk.
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Corporate bonds: Issued by companies, offering higher yields but with increased risk.
Bonds provide steady interest payments, making them appealing for income-focused investors. However, bond prices are sensitive to interest rate changes. When rates rise, bond prices typically fall.
It’s crucial to assess the creditworthiness of the issuer to gauge the default risk (the risk of the borrower not paying your money back).
ETFs
Exchange-traded funds (or ETFs) are investment funds that trade on stock exchanges, much like individual stocks. They offer exposure to a basket of assets, such as stocks, bonds, or commodities.
ETFs are a great option for investors who are looking to invest in the stock market but don’t want to put all of their eggs in one basket. One ETF can provide exposure to a broad market index, sector, or commodity.
Generally, ETFs have lower fees compared to mutual funds – which we will touch on later! Plus, being traded on exchanges allows for easy buying and selling during market hours.
Decide whether you’re interested in broad market exposure or specific sectors. Then, search for ETFs that have a stable history of returns and meet your needs.
While ETFs offer diversification, it’s essential to understand the underlying assets and the factors that influence their performance. Always review the fund’s prospectus before investing.
Mutual Funds
Mutual Funds pool money from multiple investors to purchase a diversified portfolio of assets managed by professional fund managers.
If you are new to investing, mutual funds take away the stress of managing a portfolio yourself. Instead, experienced managers make investment decisions on your behalf.
The main drawback of mutual funds is that they can be quite expensive. They often come with high management fees, which can eat into your returns. It is also worth noting that experts are always right. They are human beings, which means that they can get things wrong!
Again, only invest money that you can afford to lose.
How to Pick Your First Investment
Choosing where to put your money can seem a bit intimidating. But remember, time IN the market is better than attempting to time the market or make a ‘perfect’ choice.
At the end of the day, smart investing is about spreading your money across different investments to take advantage of different corners of the market.
Here are some questions to ask to decide which investment to pick first:
- What am I investing for? (Retirement, financial freedom, a house, income.)
- What is my investment time horizon? (how much time do you plan on investing for?)
- Do I want growth, income, or a balance of both?
- How much risk am I comfortable taking?
- Do I have an emergency fund in place before investing? (3-6 months of living expenses)
- How much can I realistically invest without impacting my daily life?
- Am I interested in active investing or passive investing?
- Would I prefer automated investing through a robo-advisor?
- How often will I review and rebalance my portfolio?
- Am I following investment trends, or am I making informed decisions?
- Do I have an exit strategy or a plan for when to take profits?
Spend some time thinking about your answers to each of these questions and then review your results. This should give you a pretty good idea of where to put your money.
It might be helpful to take a look at our guide in the different types of UK investments to better understand what each asset has to offer.
If you are willing to take a bit of risk, investing in stocks through an ISA, ETFs or Mutual Funds might be a good option for you. If, on the other hand, you want to reduce risk, Gold or Bonds might be smart assets to consider.
As a beginner, you should focus on building a long-term portfolio that offers diversification and stability.
Are you interested in learning more about investing? Why not sign up to the MoneyMagpie bi-weekly Investing Newsletter? It’s free and you can unsubscribe at any time if you find it isn’t for you.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. When investing your capital is at risk.
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