Investing money can be exciting, but also daunting, especially if it’s your first time. There are a number of ways you can invest your cash in the hope you’ll get decent returns, all which come with different conditions and considerations. You might want to buy shares in the stock market, purchase premium bonds, put money into property – whatever method you choose for your investment, there are the same initial considerations that you should take into account.

So, where do you start? We’ve listed six steps for you to follow when you choose to start investing.

1.Determine if you’re ready

Before you start investing, it’s important that you make sure you’re actually in a position to do so in the first place. Do you have any debts or outstanding payments? Always clear all your debts first, so that you are in the best position possible. Ideally, you’ll have a lump sum set aside to invest with – it’s never a good idea to use all your money at once when investing. If you’re satisfied that you’ve got a decent amount to invest, as well as an adequate amount in an account to keep you going should your investment fail, then you’re ready to start the process.

2.Have back-up funds

Always have an emergency fund set aside, preferably in an easily accessible account, if you’re going to be investing any money. Not only can this be used as a buffer should your investment fail, it will provide you with a back-up for any emergencies that crop up. Life can throw unfortunate curve-balls when you’re least expecting it, so you need to be prepared just in case. Ideally, you should aim to have at least a few months of living expenses in your emergency fund and promise yourself not to dip into it unless absolutely necessary.  Even if you never have to use your emergency account, you’ll at least have peace of mind that you’ve got something to fall back on.

3.Download an app

Organising your investments can be overwhelming and time-consuming, especially if you have more than one type of account. It’s therefore a good idea to consider tracking your investments with an app. There are a number of investment apps, many of which are free to download and use. Having all your investments organised within an app will streamline the investment process for you and enable you to monitor and track everything more efficiently. Many of these apps offer useful financial advice and can help you to assess the risks associated with each investment. Whether you’re a first-time investor, a professional, a day trader, or just looking to use the best budgeting tools, there is an investment tracking app for you.

4.Decide how to invest

As there are so many methods in which to invest your money, it’s important that you do your research in order to establish what type of investment is best for you, not what seems the most attractive. For instance, just because your friend did well from buying and developing property doesn’t mean you will too – can you afford the time and expenses to renovate an entire property into a sellable asset? Do you have the relevant skills and contacts to do so? Perhaps you want to invest in the hope it might secure your funds years in the future, say for your retirement. If that’s the case, then perhaps something where your cash is locked away – such as in a government premium bond or high yield savings account – is a more suitable option for you. Take a serious look at your situation and consider what time and costs you’re able and willing to give before you decide how to invest.

5.Start small

Once you’ve decided how to invest your money, it’s a good idea to start small. Investing money for the first time can be daunting, so it’s a good idea to start by just dipping your toe in the water in order to get a feel for the market. That way, you can pull out early if anything goes wrong and you’ll avoid losing too much. This is especially important if you’re investing in the stock market and you don’t want to risk losing a lump sum of money. Likewise, if you’re investing in property, then buying a small apartment to develop and gradually building up to larger properties is a better idea than just jumping into one massive project with all your funds. If this is your first experience with the stock market, try investing a small amount each month to get you on track, then increase it over time if you wish. You could start by contributing £20 every month – although some providers will accept as little as £1 at a time. By investing small amounts on a regular basis, it will help you to familiarise yourself with the trends in the market and allow you to take advantage of any highs and lows; for instance, you can buy up several shares when the stock market is performing poorly and prices are lower.

6.Understand the risks

It’s all very well having the relevant funds to invest and to fall back on, but you need to make sure that you understand the risks involved. Generally speaking, the longer you can have funds locked away, then the more risk you should be able to take while seeking higher returns, but this is not always the case. All investments carry some amount of risk, and the value and income you receive from them can fluctuate depending on a whole range of factors. There might also be extra charges attached to some investments, which can really impact on your returns. That is why it is so important that you do your research beforehand. Ideally, try to use providers that either charge a fixed fee or a one-off percentage on your investment.

Conclusion

Choosing to invest money is a big decision. However, as long as you follow the necessary steps, you should be able to invest with confidence.