I am 44 years old and would like to have a go at investing but have no idea where to start

30 May 2023

Question by Carol

I am 44 years old with a small amount of savings and would like to have a go at investing but really have no idea where to start. Can you please give me some pointers?

Answered by Boring Money

These are the top 10 things you need to know about investing:

The 5 main investment types

There are 5 main types of investment that retail investors tend to think about:

  • Cash

  • Property

  • Gold

  • Bonds

  • Shares

To recap the less obvious assets - bonds are when we lend money to countries and companies in return for some interest along the way. The more risky the country or the company, the higher the interest rate on offer. Shares - or equities - are literally buying ownership of a small fraction of the company.

Diversity of assets

Generally it’s a good idea to have a mix of the assets listed above. They balance each other out.

If, for example, a natural disaster were to occur, shares would typically fall because it is seen as a threat to the normal functioning of companies and markets. No-one's thinking about buying a new car, flying, or importing steel for their factory when countries are in crisis.

On the other hand, the price of gold would probably soar. It’s tangible, low risk, you can keep it under the bed - it’s seen as safe when everything else is not.

Investment risk, or volatility?

We all know that investing carries risk, but not the same kind as running across a motorway! Investment risk typically means volatility, and is not to be confused with being cavalier - or putting it all on black. It’s just describing how much something fluctuates in value. Cash is like a staid old tortoise. Bonds are like a gentle wave. UK shares are like the Peak District. And Emerging Market shares are like a grasshopper on speed.

Staying the course

An important aspect of investing is how long your timeframe for investing is. You want to avoid being a forced seller when things aren't looking too good. If you had invested in 2005 and needed the cash to buy a house in 2008 - after the global meltdown - you would have been out of luck. If, however, you had invested in 2005 and taken the money out in 2015, you would have made 74%.

The longer your timeframes, the more volatility you can stomach. If you are saving for 20 years and are sitting in the comfort blanket of cash, the major risk is that you won’t have enough money when you retire. Taking out a cash Junior ISA for a baby is nothing short of bonkers. This is an 18 year contract so for heaven’s sake spice it up for schnookums.

The benefits of funds

Less confident or time poor investors should avoid buying single shares - or following tips from so-called ‘experts’. Use a fund. This has been true since the 1600s, when investors realised that packaging together and backing multiple ships and journeys of the East India Company was smarter than backing one which could easily be sunk or raided.

Think of a fund manager like a personal shopper - you employ them to find the best combination of things for you, and match them together. A fund will typically have about 30–80 investments in it, so you don’t have to do the choosing or monitoring.

Multi-asset funds? Even better

A great way to start investing is through a multi-asset fund. Think back to 'diversity of funds', and take away all of the hard work. All you have to do is pick one investment fund, and the experts will blend together asset classes from different regions - a dash of China, a dollop of bonds, and a pinch of Apple.

A passive multi-asset fund is the cheapest way to get started. Generally, you will choose how risky you are willing to be. This means taking into account your timeframe. 5 years or less? Go less risky. 10 years or more? Spice things up a bit.

Use your ISA

Don’t pay more tax than you need to. We all have a £20,000 ISA allowance every year. An ISA is like a see-through financial Tupperware box you stick your investments into, and the tax man can’t get into it. Use it.

Don't procrastinate

Don’t procrastinate. There is no right time to start investing, and no-one has a clue what the future holds. Not even very clever, grey-haired Mathematicians.

We live with dodgy global leaders, oil price shenanigans, pandemics, and in a nation that likes Love Island. This all defies logic - and how grown-ups should behave. Drip feeding in a little every month on a direct debit is a good way to smooth out the price at which you buy into the markets.

Don't panic

Do not panic if things go south during your first year of investing. In 2008, £1,000 in the FTSE fell to about £700. The next year it almost made it all back. If the Daily Mail shrieks stock market meltdown in the headlines, consider topping up. The stock market is “On Sale” and cheaper than it was last week. This takes cojones by the way, but is actually quite sensible.

Save, save, and save

Ignore all the waffle, jargon and over-complexity. If the experts could really predict what markets would do, they wouldn’t need to work as an expert. Save as much as you can, as often as you can, as early as you can. Pick a simple investment to get started with. Don’t overpay.

What's next?

You’ve come to the end of our ‘Investing for Beginners’ course, and are ready to take the first step in your investment journey. Why not take a look at our Best Buy 2023 award winners to see which platforms and providers we think are a good place to start.

Answered by

Boring Money