Ways to Trade and Invest: 11 Methods Explained for Beginners

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There are a lot of ways to put money into markets, and the names can make them sound more alike than they are. This page sorts them out. Each method has its own guide that assumes you know nothing yet, and this page helps you work out which ones are worth reading first.

Each guide is written for someone who knows nothing about markets yet. They’re listed from the most beginner-friendly to the most complex, but each one stands on its own, so read them in any order. Examples use pounds or dollars; the maths works the same in any currency.

Four ideas to know first

1

Investing and trading are different jobs

Investing means buying something you expect to grow in value or pay you an income over years, such as part of a company. You buy, hold and mostly leave it alone.

Trading means buying and selling more often, sometimes within minutes, to profit from short-term price moves. It takes far more time and skill, and most beginners who try it lose money.

2

Owning something versus betting on its price

Some methods give you a real thing: a share of a company, a slice of a fund, a loan to a government. Others are derivatives, which are contracts whose value comes from the price of something else. With a derivative you never own the underlying thing. You just make or lose money as its price moves.

Derivatives (CFDs, spread bets, futures and options) are the methods where beginners get hurt most often, and they get their own warnings in each guide.

3

Leverage: the word to watch for

Leverage means controlling a bigger position than the money you put down, using money borrowed from your provider. With 10 times leverage, £1,000 controls £10,000 of shares. A 5% move in your favour makes you £500, which is half your money. A 5% move against you loses the same £500. Leverage makes small price moves feel huge, in both directions, and it’s the main reason some products can lose you more than you put in.

4

Risk and return come together

Anything that can grow faster can also fall further. Cash in a bank account barely moves. Shares can rise a lot over the years, but they can also lose a third of their value in a bad year. A promise of high returns with low risk is the classic sign of a scam.

All the methods compared

The risk ratings compare these methods with each other. “Can you lose more than you put in?” assumes you’re a retail customer; see each guide for how this varies by country.

Method	What you get	Usual holding time	Can you lose more than you put in?	Risk
StocksBeginner	Part ownership of a company	Years	No	Medium
FundsBeginner	A slice of a big pot of many investments	Years	No	Medium
ETFsBeginner	A slice of a fund, traded on a stock exchange	Years (can trade any day)	No	Medium
BondsBeginner	A loan to a government or company that pays interest	Months to years	No	Lower
Ready-made portfoliosBeginner	A managed mix of funds chosen for your risk level	Years	No	Medium
CryptoIntermediate	Digital tokens recorded on a blockchain (or a fund that holds them)	Anything from minutes to years	Only if you borrow or use derivatives	Very high
ForexAdvanced	A bet on one currency rising or falling against another	Minutes to days	Yes	Very high
CFDsAdvanced	A contract with a provider, not the asset itself	Minutes to weeks	Yes	Very high
Spread bettingAdvanced	A bet of a set amount per point of price movement	Minutes to weeks	Yes	Very high
FuturesAdvanced	A standardised contract traded on an exchange	Minutes to months	Yes	Very high
OptionsAdvanced	A contract giving the right to buy or sell at a set price	Days to months	Only when selling options	High

Which might suit you?

Find the line that sounds most like you. These are starting points for your reading, not recommendations.

I want my savings to grow over five years or more, without much effort

Low-cost funds that spread your money across hundreds of companies are where most long-term investors start.

Funds ETFs Ready-made portfolios

I want to own a few companies I believe in

Picking individual companies is fine, but most people keep it to a small part of their money and hold funds for the rest.

Stocks

I want something steadier that pays an income

Bonds usually rise and fall less than shares, and they pay regular interest.

Bonds Funds

I’m curious about crypto

Only use money you could lose completely without it hurting. Prices can halve in months.

Crypto

I want to learn short-term trading

These all use leverage. Practise on a demo account, read the warnings in each guide, and work through our trading lessons first.

Forex CFDs Spread betting Futures Options

Before you put in any money

Keep emergency savings in cash first, enough for a few months of bills, so you’re never forced to sell at a bad time.
Pay off expensive debt such as credit cards. Clearing a card that charges 25% interest beats almost any investment.
Decide how long the money can stay invested. Money you need within about five years usually shouldn’t go into shares.
Use a provider that is authorised by your country’s regulator and check it on the regulator’s own register (see the table below), not on a link the firm sends you.
Start small, and never put in money you would be upset to lose.

Check a firm with your regulator

Scammers copy the names and websites of real firms. Always look a firm up on the regulator’s own register, and contact it using the details listed there.

UK: Financial Conduct Authority (FCA). Check: FCA Register
US: SEC and FINRA for shares and funds; CFTC and NFA for futures and forex. Check: FINRA BrokerCheck and NFA BASIC
EU: Your national regulator (for example BaFin in Germany, AMF in France, CBI in Ireland), working to EU-wide rules set with ESMA. Check: Your national regulator’s register
Australia: Australian Securities and Investments Commission (ASIC). Check: ASIC professional registers on Moneysmart
Canada: Canadian Investment Regulatory Organization (CIRO) and provincial securities commissions. Check: CIRO AdvisorReport and the CSA National Registration Search

The guides

What about private equity?

Private equity means owning part of a company that isn’t listed on the stock market. It’s usually done through a fund that buys businesses, tries to improve them and sells them several years later. Most private equity funds are only open to professional or wealthy investors. They ask for large minimum amounts and can tie your money up for ten years or more.

Ordinary investors usually get closer to it in less direct ways:

Listed investment trusts and companies that hold private equity funds or stakes, and trade on the stock exchange like a share. This is the most common route in the UK.
Newer fund types built for hard-to-sell investments, such as Long-Term Asset Funds (LTAFs) in the UK⁵ and European Long-Term Investment Funds (ELTIFs) in the EU. These let you sell only at set times, and sometimes only with notice.
In the US, interval funds and shares in listed private equity firms. Several countries are changing their rules to let pension savings hold more private assets, so check what’s allowed where you live.

The risks are different from shares. You may not be able to sell when you want. Fees are usually higher than for index funds. Valuations are estimates updated monthly or quarterly, so prices can look steadier than the businesses really are. Through a fund you can’t lose more than you put in, but you can lose a large part of it.

Frequently asked questions

What is the best way to invest for a complete beginner?

There’s no single best way, because it depends on your goals and how long you can leave the money. For most beginners with a time frame of five years or more, a low-cost fund that tracks a broad stock market index is the usual starting point: it’s simple, cheap and spreads your money across hundreds of companies.

What is the difference between trading and investing?

Investors buy and hold for years, aiming to benefit from companies growing and paying dividends. Traders buy and sell often, aiming to profit from short-term price moves. Trading takes more time and skill, costs more in fees, and most people who try it lose money.

Which investments can lose more than you put in?

Products that use leverage or create an obligation: CFDs, spread bets, leveraged forex, futures, and selling options. In the UK, EU and Australia, retail CFD and spread betting accounts have negative balance protection, which stops your account going below zero, but you can still lose everything in it. Futures and sold options have no such protection. Buying shares, funds, ETFs or bonds outright can’t lose you more than you paid.

How much money do I need to start investing?

Less than many people think. Many platforms let you start with £25, $10 or similar, or with a small monthly amount, and some let you buy fractions of a share. Fees matter more on small amounts, so compare them before you choose.

Sources and further reading

Numbers in the guide, like ¹, point to these sources. Rules, fees and tax change, so check the latest version before you act.

FCA confirms permanent restrictions on the sale of CFDs and CFD-like options to retail consumers (July 2019) Financial Conduct Authority.
Investor Bulletin: How Fees and Expenses Affect Your Investment Portfolio. Investor.gov (SEC).
Investments: what we cover. Financial Services Compensation Scheme (FSCS).
What SIPC Protects. Securities Investor Protection Corporation.
FCA widens retail and pensions access to Long Term Asset Funds. Financial Conduct Authority.