People have all sorts of reasons why they don’t invest their money – whether it feels like it’s too late in life to start, or you don’t feel clued up enough about money matters, there are many excuses to be made. And when you consider the volatility over the past few years, it can seem like an especially daunting time to invest. But it doesn’t need to be intimidating. Here, experts from Interactive Investor, a subscription-based online investment service, examine the preconceptions that stop people from investing.
I’m too young
When cash is tight and there’s plenty to spend it on, putting money aside in your 20s can seem like the last thing you want to do. But take time to work out some bigger life goals, says Jemma Jackson, head of public relations at Interactive Investor.
Long-term investors will benefit from compounding – returns on the returns received on your original investment. With diligent budgeting, just £25 a month or a smallish lump sum – say £200 – is enough to get going, she says. But don’t begin investing until you clear your debts (excluding mortgages and student loans) such as credit cards. And try to hold rainy day savings too, suggests Kyle Caldwell, collectives editor at Interactive Investor – ideally worth three to six months of salary, for unexpected costs.
It’s too late to start investing now
According to the most recent published data by Interactive Investor, a fifth of new customer referrals to Interactive Investor via its Friends and Family scheme are women over 55. “It’s easy to feel like you’ve left it too late,” says Jackson, but at this age you’ve still got 10 years or more of working life ahead of you – and work pension pots are having to stretch for longer, too. “We also need to build in financial resilience for unplanned life events, as well as saving for particular goals.” Adapt your investment strategy to your time horizon, she says.
I don’t know anything about money – it’s too complicated
You don’t need much knowledge to get going, says Caldwell. There are plenty of guides for beginner investors online. First-time investors have lots of options. They can use an investment platform to pay into an investment fund – a collective pool of money – which is managed by professionals who choose a variety of holdings, such as stocks and shares, government bonds, and even property and commodities, such as gold, to spread the risk. Investment and markets are awash with acronyms and unnecessarily complex language, says Caldwell, so he’s written a jargon busting guide to demystify the lingo. Interactive Investor’s quick-start range of rated funds offers a simple starting point for investing and includes low-cost funds that have been specially selected by experts.
The gender investment gap
There are many reasons why there tends to be fewer female investors than men, but Jackson says that “once women make the leap and invest, our data shows very similar risk profiles and investing habits. In fact, our most recent data shows they’ve outperformed men over the past three years.”
It takes too much time
Investing can take as little or as long as you want it to – and it can be as simple as setting up a monthly standing order via an investment platform, perhaps into a stocks and shares Isa (individual savings account) or Sipp (self-invested personal pension) and leaving it to professional fund managers. Some investors like to pick their own individual stocks, particularly as confidence grows.
I’m worried about costs
Of course, it’s important to recognise that investments can go down as well as up. However, with inflation eroding the value of cash, it’s worth asking yourself whether your savings could be working harder by tapping into the long-term growth and income potential of the stock market. You can outsource investment decisions to professionals (you can read up on the performance of individual funds online) – and pick and split funds according to your risk appetite.
Newcomer investors might worry about costs. Some platforms, such as Interactive Investor, charge a transparent flat fee – its subscription service Investor Essentials costs £4.99 per month and comes with a free monthly trade, and as many free Junior Isas as customers have children. All its service plans also come with free regular investing for those who have signed up to the monthly investing service. Other platforms charge a percentage, so the sum grows along with the value of the investment. It’s important to be aware of the impact of charges over the long term, and there are plenty of online tools to help you choose the right platform for you. “What might look like good value in the early days can add up to tens of thousands of pounds over the years as your pension or investments grow,” says Jackson. “These are potentially life changing sums of money, so it’s worth comparing costs carefully.”
The economic outlook is so dire – why bother?
Often it may not feel like the right time to invest, but if you decide to take the leap, it pays to be patient. While the value of your investments may fall or rise in the short or medium term, the long-term trend in the stock market has been upward. “Look at a graph of the FTSE 100 over the past 25 years,” says Caldwell. “Volatility is part of the cost of investing in the stock market. You might get short-term pain, but over the long term, stock markets have tended to reward patient, long-term investors.” Dividend payments – and interest on these – also boost the return on your cash. “It goes back to the principles of investing regularly for the long term,” says Caldwell.
Make your move today at ii.co.uk
The value of your investments may go down as well as up. You may not get back all the money that you invest. Past performance is not a reliable indicator of future results. If you are unsure about the suitability of an investment product or service, please seek advice from an authorised financial advisor.
