How to Set Up Your First Investment Account

So you’ve decided to take the plunge. Woohoo – go you! The next step on your journey to financial freedom through educated investing is to set up your first investment account. I’ve broken this down into five simple stages for you so you know what to expect.

1.  Choose a provider

Don’t be swayed by bank loyalty, even if your bank does offer investment options – shop around, because fees can differ widely between providers. Moneywise offers a comparison tool, as does Money Supermarket, where you can compare fees and performance of stocks and shares ISAs.

 2.  Decide on the type of account you want

A stocks and shares ISA is a good place to start if you’ve not maxed out your tax-free savings allowance for the year yet.  Don’t miss out on the opportunity to get ‘free’ money by saving on tax! If you’ve reached your allowance, you may want to consider a SIPP (Self Invested Pension Plan). Why not check out my for ideas?

3.  Application and ID check

Most providers now have an online application process which is normally reasonably straightforward, as it would be for a savings account. You choose the account you want to open, put in your personal details, and usually the bank account or card details from which you will fund it. If you’re choosing a regular investment option, you may be asked to set up a Direct Debit and choose a date when you want the money to come out of your account each month – I recommend as close to payday as possible, because of course I advocate paying yourself first.

Although the online process is normally simple, most providers will request an identity check before the account can be opened and money can be paid in, however. This is the bit that can feel like a bit of hassle, but there are obviously security reasons for this. The provider will usually ask you to photocopy a piece of photo ID (passport, driving licence or birth certificate) and then take it to be verified, either by the bank you have a current account with, by your employer, or someone else entrusted with verifying ID such as a solicitor, justice of the peace, magistrate, or religious leader. They should provide the wording they need on the ID verification for it to pass. You will then need to send the verified photocopies back to the provider, usually by post, although some may accept scans via email or upload.

4.  Choose an investment product

If you’re a first-time investor, a tracker fund  is a simple type of fund to start with, since they track an index they are diversified and have some of the lowest fees.  Your diversified portfolio is put together for you so they require less management and in-depth knowledge.        You can also consider EFT (Exchange Trade Funds) and unit trust funds which also cluster individual shares into a managed fund.

You can screen different funds when you start narrowing it down – the Financial Times offers a fund screening tool so you can see what kind of funds are available to invest in.

5.  Start investing!

Now it’s time to either pay in your lump sum and or set up an automatic regular payment. I highly recommend that if Direct Debit is an option for monthly investing, you choose that, so the money just goes in without you having to do anything. Don’t forget – this isn’t about short term gains, it’s for the long term, so don’t panic if you see a drop in your returns one month. If you’re investing monthly, pound cost averaging will reduce your risk if the market doesn’t perform well for a few months. Stay in for the long haul and reap the rewards!

Need more help getting started? Why not drop me a line and have a chat about coaching and group support?