Let’s talk about creating wealth and investing. First of all we have a reader offer for you from Wealthsimple, the user-friendly investment service that helps people build smart portfolios, and then we’ll move on to the big picture of money management, and investments in general.

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Reader offer: If you decide to invest using Wealthsimple, PennyGolightly readers can get their first £5,000 managed for free for one year. That’s no fees for 12 months. To take advantage of this free offer, simply sign up to use the service via this link.

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Building wealth & investing

If you want to increase your net worth, retire well, retire early, or even become financially independent, there’s a list of money management principles that most financial experts agree you need to follow. Here’s how most people get started:

• Learn how to make and stick to a budget
• Organise and pay off debts, especially high interest debts
• Take out insurance relevant to your personal circumstances
• Save up an emergency fund
• Create other savings
• Pay into a pension
• Buy property
• Make other investments (shares, bonds, funds, commodities, foreign currencies, art and antiques, and so on)

Investments are anything that you buy or put money into in the hope of making a profit or return, and returns on investments can include interest, share dividends, rent and capital gains.

It’s wise to make sure you have an emergency fund in place before considering making investments. Why? Because there’s no such thing as a no-risk investment and the value of investments can go down as well as up. Over the medium to long term, say a period of ten years or so, investments such as shares and funds tend to perform better than cash savings, although this is not 100% guaranteed.

Some investments are seen as relatively safe, and others are seen as more risky. The general advice is not to ‘put all your eggs in one basket’, and to have more than one type of investment, to spread the risk. This is sometimes referred to as creating a balanced portfolio. Attitude to risk is also important, and depends upon your personality, how much money you have to spare, and how far you are from retirement.

Two other things to always consider when making investments: fees and tax implications. Managing funds and platforms takes effort so fees are usually charged, but high charges can eat into your returns so it’s sensible to be wary of them. Tax information is available on government websites, and most people are able to avoid paying tax up to a certain amount by investing through an ISA.

Some people like to spend time over their investments, such as researching and buying individual shares, and other people prefer to be less hands on and buy into investment funds instead. These funds often suit smaller investors, and include unit trusts and Open Ended Investment Companies (OIEC). Funds also allow customers to pool their resources and buy a wider range of investments, which may partly help to spread risk.

More about Wealthsimple

Wealthsimple is a new kind of investing service that combines user-friendly digital tools and personal investment advice to help people build smart portfolios to achieve their financial goals. Customers are able to invest their money in a globally diversified portfolio of low-cost index funds, and vary their investments according to their preferred level of risk.

This leading digital investment manager offers transparent long-term investment management without the high fees and account minimums associated with traditional investment managers. People can easily start investing through the Wealthsimple website and app, but the company also offers customised advice from a qualified investment adviser.

Founded in 2014, Wealthsimple is now available in Canada, the United States and the United Kingdom. It has over 75,000 clients globally and holds £1.4 billion in assets.

Wealthsimple: useful facts

• No minimum amount is needed to open an account
• Fees on portfolios under £100,000 are 0.7%, and on portfolios over £100,000 they’re 0.5%
• Wealthsimple offers three account types: GIA – General Investment Account (commonly called a personal account), ISA – Individual Savings Account (invest your post-tax money and returns are tax-free), and JISA – Junior Individual Savings Account (an ISA that can be opened for minors by their legal guardian)
• Portfolio types include Growth, Balanced, and Conservative, with relative risk levels graded from 1 to 9
• Built with passive funds
• You can fund your account with institutional transfers, debit cards, bank transfers, or regular contributions through direct debit mandate

Regulation: Wealthsimple is authorised by the Financial Conduct Authority (FCA) to provide investment advice and discretionary portfolio management.

In summary, this is an FCA regulated, relatively low cost option for anyone in the UK who’s thinking about investing, whether that’s saving to buy a home, investing for retirement or building a rainy day fund.

Do you already invest, or are you thinking about becoming an investor? Would you consider a platform that combines automation / robo-advice and human advisors?

Disclosure: Sponsored post produced in collaboration with Wealthsimple.

Always remember to do your own research before making an investment decision, seek advice from a registered Independent Financial Adviser (IFA) if necessary, and keep in mind that the value of investments can go down as well as up especially in the short term.