A Beginner's Guide to Investing

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Investments
Beginner's guide

A beginner’s guide to investing

So you're curious about investing? That's great. By learning about ways to invest your money now, you could be giving your future self a powerful gift.

Before you invest your money, it's important to invest some time into learning the basics and understanding the risks. With that in mind, we've demystified the jargon and unpicked the detail to bring you a no non-sense guide that takes you through everything you need to know and how to get started.

4 key things to remember

Save up an emergency fund of 3 to 6-months' worth of living costs before you invest.
Think about starting small and watching your investment to see how it goes.
Be prepared not to touch your investment for at least 3-5 years.
Get advice from one of our Wealth Advisors at no cost to help you decide on what’s right for you.

What is investing?

Investing is a way of setting aside some of your money for the future by putting it to work for you. When you invest, you're buying something that you believe will increase in value over time.

What can you invest in? Well, from the more common types of investments – such as gold, bonds or shares, to the more unusual – such as coins, comics or cryptocurrencies, the answer is almost anything.

Rather than baffling you by describing the entire investment universe, let's focus on the 2 most well-known ways to invest: shares and funds.

When you buy shares, you're buying a tiny stake in a company. If the company performs well, you earn a profit. If the company does badly, your investment may not grow and you could even lose the money you invest. Share prices can also be affected by other factors, such as supply and demand, interest rates and the wider economy.

When you buy funds, you're buying into a ready-made basket of investments. Some funds are even managed for you by an investment professional. Funds include many different investments rather than just one, which is why many people start by investing in funds.

Everything you need to know about Investing

By investing in the stock market, you get access to a diverse range of assets, such as shares and funds. The diversity is what gives your money the potential to generate a better return than cash in the long run.

So one of the first decisions you’ll need to make is how you want to receive this potential return – whether via an income, an increase on the value of your investment over time, or combination of both.

Investing for the short term

Investing for income could be a good shorter-term strategy if you’re nearing or in retirement. By choosing shares or funds that pay dividends or bonds that pay interest, you can receive regular payments to boost your existing income or pension.

Investing for growth

Investing for growth could be good if you have more time on your side to grow your money. Growth investments aim to increase the value of the actual investment – known as capital gain. The objective of a growth fund would be to grow the original sum invested. For a growth share, it would be to increase the value of the share.

Big things in life can, and do, happen out of the blue. We understand that. With any HSBC investment, you have peace of mind knowing that you can access your money if you need to.

However, investments have a better chance of producing favorable returns the longer they are left to grow. That's why, you should think of investing as a long-term commitment and aim to invest for at least 3-5 years.

That's a great question to ask yourself. To help you work out if you can afford to leave your money to grow, it can help to create your own financial action plan.

Another thing to think about is whether you have any short-term, interest-bearing debts such as loans and credit cards. If so, it's usually best to pay off your debts first before you start investing.

And we always recommend that you've built up a rainy day fund of between 3 and 6 months' worth of expenses saved up before you make an investment. This gives you a financial cushion in case there’s an emergency so you should be able to leave your investment untouched and give it the time it needs to grow.

How to get started

So you've carefully assessed your situation and decided investing might be right for you. Now what?

To invest with HSBC, you need to be a current account customer, a Bermuda resident and over 18 years old.
Book an appointment with one of our wealth advisors. If you have a Premier account, tell us more about your interest in investments, and your Relationship Manager will be in touch.Take the time out to understand the risks.
Take the time out to understand the risks.

Understanding the risks

It is important to understand is that no investment is risk-free. You're putting your money into something you believe will go up in value but there are no guarantees.

You'll be exposed to the uncertainties of the markets, which means the value of your investment can and will jump around so you could get back less or more than you put in. Your expected returns can also fluctuate. This is all normal and to be expected. With investing, risk and reward go hand in hand

As a general rule of thumb, higher-risk investments have the potential to give you higher rewards while lower-risk investments tend to equal lower rewards.

Taking a small amount of risk could be a good way to dip your toe in the water. Then you can watch what happens to your investment – and increase your level of risk later if you want to.

You can talk to one of our Wealth Advisors to help determine how much risk if right for you.

Beginner's guide to investing