If you’re thinking about investing, it’s not a way to get rich quick: you must be prepared to lose some or all your money. Investments are for the long-term so you might be better off reviewing your budget to maximise your income.

Should I save or invest my money?

Deciding whether to save your money in the short-term or invest it for a longer period (upwards of five years) is important. Before investing, some questions you should ask yourself are:

• Do I have a savings fund I can quickly access for emergencies (such as a broken boiler or car)?
• Do I have unmanageable debts that I should try to pay off first?
• Can I afford to lock away some of my money for a long period of time?
• Can I afford to lose my money if the value of my investments goes down?
• What level of risk am I comfortable with?

If your reason for investing is to make money, perhaps because of limited household income, then remember that investing is not a way to get rich quick.

What should I look for when choosing to invest online?

You have probably seen adverts on social media for apps and websites that make investing look easy, treat it like a game, or a persuade you to think that investing is a quick way to get rich. 

Investment platforms let you buy and hold shares, bonds, funds, or other investment types in one place. Some will let you make your own choices, while others will give you ready made selections that match your attitude to risk.

Before choosing any investment platform, there are four things you should check:

1. Is the platform regulated by the FCA?

The Financial Conduct Authority (FCA) is the organisation in the UK that regulates firms offering financial services, such as banks and investment companies. If a firm wants to offer certain financial services, then they need to be registered (also referred to as authorised or regulated) with the FCA.  

If a firm is registered, you can be reassured that they:

• have signed a code of conduct to say they’ll treat customers fairly
• must provide you with information that is clear, fair and not misleading
• must have adequate systems in place to protect your data and your money.

You can check the FCA Register to confirm if an investment provider is authorised and what it is authorised to do.    

Scammers might try to use the name of a registered firm to look legitimate so you should only use the contact details listed on the register when doing business with any firm. 

Some investments in things like gold or wine and most cryptocurrency products or services are not regulated by the FCA.

2. Will my money be protected by the Financial Services Compensation Scheme (FSCS)?

If you have an investment and the provider or your advisor goes bust, you might be able to claim back up to £85,000 of your money if it was protected by the FSCS.

To be able to claim your money back the company must have been authorised by the FCA (see above) or the Bank of England’s Prudential Regulation Authority and it must have also regulated the service and product it provided.

Claims for poor investment performance (eg, if the value of your investment drastically drops) are generally not covered by the FSCS. 

3. Who can I complain to if things go wrong?

If you have a complaint about  your investment provider then you might be able to get the Financial Ombudsman Service to investigate it on your behalf if the firm is regulated by the FCA.

You will need to have tried to resolve your complaint with your provider before they are able to help.

4. How can I spot if an investment is a scam?

As a rule, if something sounds too good to be true then it probably is. But spotting an investment scam isn’t always easy.

Should I consider high-risk investments like cryptocurrency?

Cryptocurrencies, like Bitcoin and Ethereum, are often in the news, because their ‘values’ can fluctuate massively, having reached ‘all-time’ highs recently. 

Because of this, some people think they’re an easy way to make lots of money. But their unpredictability makes them a very risky investment – their value could go up or down (even in the same day) and even fall to zero, meaning you would lose all your money.

Most cryptocurrencies and services are extremely high-risk investments not regulated by the FCA or covered by the FSCS. This means, if the company you put your money into goes bust, or you were scammed it’s highly likely you will lose your money. 

Cryptocurrency isn’t the only type of investment that’s risky because you can lose all your money. 

Can I trust investment recommendations on social media?

Whether it's posts on Instagram, Facebook or Twitter, or videos on TikTok and YouTube, you’ve probably seen investment advice and opportunities from self-proclaimed ‘financial experts’ and social media influencers.

It would be unwise to invest any money based on a recommendation made on a social media platform.  Most people giving investing advice on these platforms have no significant financial experience or training and care should be taken when considering their advice. 

Scams are another risk of using social media to get investing advice. Scammers often fake profiles of well-known celebrities or the websites of legitimate firms to steal your personal information or get you to invest in get rich quick schemes.  According to Action Fraud over £145m was lost to cryptocurrency fraud in 2021 alone.