I’ve been investing for six-months now. That sounds more impressive than it actually is. You see I’ve not actually done much. Find out why I just can’t get my head around the terminology and how you can give it a try like me but with minimal effort.
I’m thrown myself out of a helicopter, trusting the instructor will pull the chute. I’ve hurled myself off a bridge with just a wire around my waist. And I’ve braved whitewater rapids on a few occasions. Sounds like someone happy with taking risks yeah?
Well, I like to think so. I rarely go for the safe option – but it’s a different story when it comes to my money.
There are studies that show we’re more likely to fear losses than go for gains, particularly with cash, and it seems I adhere to the statistics. The other week I was unreasonably angry with myself for losing just two quid from my pocket on a run.
It might seem ridiculous to worry about such small change, but I hate the idea that I could lose any money. And this is probably a large part in why I’ve never ventured into the world of investments. It makes me uneasy that I could lose money on the whim of a market. Incredibly uneasy.
Don’t get me wrong, I don’t have dreams of accumulating enough in an underground vault so I can swim around in it à la Scrooge McDuck. I like to use my savings to live the lifestyle I want, whether that’s travelling or going out for a slap up meal.
Though I do also save for the sake of saving too. I’ve a stash of cash as an emergency fund I can easily access if I need it without paying any penalties, and I regularly put money aside for big events and purchases like holidays and Christmas.
And it’s not that my savings haven’t been making money. They have – just in a way I can control. I’ve always kept money in some kind of cash account. I pride myself on getting the best interest rates I can – my 11 different current accounts attest to this.
Looking for a new savings solution
Since many of these high-interest rates were cut in the new year, my returns have reduced too. Even so, a good spell of saving means I’m close to reaching the peak of my tax-free Personal Savings Allowance (£1,000 a year in interest for a basic rate taxpayer). This means I’ll have to start paying tax on my interest, cutting how much I make above this by 20%.
Plus, my move away from a 9 to 5 into spending more time on my blog and freelance writing means my pension isn’t getting the contribution I know it should be.
So the obvious answer was to look into investing.
My first time investing
Back in March, just before the “ISA deadline” and end of the financial year, I began to try and understand just what the hell was going on with investing.
Now, I came at this with a starting knowledge of just slightly more than nothing. I avidly read the money pages of newspapers, but I idly flick over the investing pages. I was essentially a complete beginner, most of my knowledge based on what I’d seen in popular culture.
And that’s not a good place to start. When you see stock and shares in the movies, it’s all shouting, ego and treachery on Wall Street as good looking people wearing braces shout “buy” or “sell” into phones and each other.
Or we get bland real-life stories about men sitting in front of computers sexed up with all-star casts (Ewan McGregor playing Nick Leason in Rogue Trader a prime example). The silver screen doesn’t actually tell you what investing is all about, and glosses over the fact that other than the words “stocks” and “shares” it’s a whole new financial vocabulary.
I didn’t find it easy to understand these new concepts. ETFs, robo-advisers and indexes were among the new terms to me, and the jargon list goes on. I thought I could read a quick guide to get started, but it took forever to even find a decent explanation of what a platform was. There’s a lot to take in. And to be honest a lot of it just didn’t make sense.
And I expect that’s probably where a lot of you decide it’s not worth the hassle. But rather than give up, I did decide to dip my toes in the water, even though I wasn’t completely clear about lots of the terminology. And bit by bit it’s become slightly clearer.
So if you want to give investing a try but don’t want to spend too much time and brainpower on it, I’ve six basics to help you get going.
1. You don’t have to understand investing to try it
Right, you know that “robo-adviser” term I didn’t understand? Well it’s basically a fully automated way to invest, using algorithms to follow the markets (or something like that anyway). This means you just choose the level of risk you want for your investment, and leave it be. There’s no buying and no selling. No need to dig any deeper into FTSEs and Dows. My life can go on.
This is what I opted for back in March. I decided to go with a lump sum deposit into a Stocks and Shares ISA from robo-advisers Nutmeg. And I’ve not done anything else since!
As I understand more about investing, this form of investing seems much more suited to me than getting fully involved. Maybe one day I’ll move onto the next step, but I’ve decided to just stick with what I’ve got right now.
2. You don’t need lots of money to invest
The idea that you need thousands of pounds to invest is a myth. You can start off with as little as £10 a month with some providers.
However don’t jump straight in with all your savings. I’d recommend having some money in cash savings before investing. Not just so you can get it if you need it, but also because you can get up to a guaranteed 5% from many regular savings accounts or current accounts.
3. You should look for the lowest fees
A few months after I opened by ISA, there was some big news which seemed to get the investing world excited. A company called Vanguard launched its own direct to customer offer (you previously could only use them via another investment “platform” company). The difference to other investing options was the promise of very low fees. And even with small investments the fees can make a huge difference.
When I took out my ISA, my choice of Nutmeg was largely down to a cashback offer of £170 from Topcashback – in my head this money mitigated some of the risk. But now I know a little more, and now the Vanguard offer is available, I’d make sure that the fees are low before looking at any cashback options.
P.S. definitely don’t invest just for cashback!
4. Put it in an ISA wrapper
Long-term readers will know I’ve said the ISA is dead. Well technically I said the Cash ISA is dead. If you’re investing you should be looking to put your money in a Stocks and Shares ISA. This means any return you make will be tax-free. You can invest up to £20,000 each financial year, so most of you will be fine.
You can also get the Lifetime ISA (or LISA) as a Stocks and Shares ISA, though there aren’t many options right now.
5. Your money is at risk
What comes up, must come down, right? And this really is true with investments. Some of the articles I read even stressed how we’re possibly at the top of the market. Gulp.
Unlike cash savings, there’s the potential to end up with less than you put in. Now, hopefully the opposite is true and you actually end up with far more money. But even so don’t, whatever you do, invest money you really can’t afford to lose.
6. You need to leave that money there
Every now and then I check my Nutmeg app to see how my money is going. Well, six months into my first investment the little graph looks like a mountain range. At one point in the first month I was down 2%, the lowest point of a foreboding six-day canyon. Not the best start for my confidence!
It’s since rallied and currently sits at 1.72% above my initial investment. That doesn’t sound too impressive, does it? But the idea is not to look at short-term gains – or even worry about what is happening to the money.
Experts say you want to invest for at least five years, so I’ll be doing just that – if not longer.
I hope this article has helped you get over your investing fears. You’ll at least know you’re not the only one who just doesn’t get it!