All you need to know about investing. 12 things. 3 minutes.

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  1. Investments exist so that countries and companies can raise money. We collectively give them money so that they can afford to trade (East India Company), build roads (governments) or buy new planes (British Airways). They either pay us interest or get more valuable so we make money when we sell them.
  2. There are 4 main types of investment that retail investors tend to think about. Property. Gold. Bonds. Shares. Bonds are like IOUs we receive from countries and companies which net us some interest and a share of any good fortune the company has. Shares, or equities, are literally buying ownership of a small fraction of the company.
  3. Generally it’s a good idea to have a mix of this stuff because they balance each other out. Donald Trump starts shouting at North Korea? Shares will typically fall but people will start buying something ‘safe’ like gold. It’s scales and balances.
  4. We all know that investing carries risk. But this risk is not the same as running across a motorway, which is just stupid risk! Investing 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 will jump up and down in value.
  5. How long will it be before you need your money back? The main thing is to avoid being forced to sell when things are rubbish. If you are saving for 20 years under 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.
  6. Less confident or time-poor investors should avoid buying single shares or following tips from the cabbie or an ‘expert’. Use a fund. Think of a fund manager like a personal shopper you employ to find the best 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.
  7. A great way to start is a ‘multi-asset’ fund. Back to point 2. This means you pick one investment fund and in that, the experts will blend all of those investment types from around the world.
  8. 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.
  9. Don’t procrastinate. This is a big one. There is no right time to start and no-one has a clue what the future holds. Not even very clever grey haired mathematicians. Drip feeding in a little every month on a direct debit is a good way to smooth out the price at which you buy in to the markets.
  10. Do not panic if in year one things go south. 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.
  11. Ignore all the waffle and jargon and over-complexity.If the experts could really predict what markets would do they wouldn’t need to work as an expert.
  12. Recommendations!
    • I would suggest Vanguard LifeStrategy in an ISA if you are worried about high fees.
    • If you only want to start with a tiny amount try Wealthify which opens an account for people with £1.
    • If it’s a pension and you like the security of a huge brand which won’t go anywhere then try Aviva for a (relatively) simple journey.
    • If you are time poor and want someone to do it all for you try Nutmeg, which asks a few questions and then does a Blue Peter – here’s-one-I-made-earlier.

Our Best Buys tables have lots of filters so you can pick the right one for you. If you want to blend your own then check out some ideas from independent research firm Square Mile here.


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