Isn't investing for rich people?
11 July, 2017
Investing could do with an image makeover. Somewhere between the industry jargon and the ever-changing government schemes the very concept has been so head-bangingly complicated that we have become alienated from even thinking about it.
Isn’t investing that thing that really rich people do?
The Gordon Geckos and Wolves of Wall Street certainly haven’t helped. The Hollywood version of the stock market is all Ferraris and unpleasant guys in sharp suits. A million miles from the reality of our lives. It may surprise you to know that these days you can invest online and get started with just one small pound!
Talk to me straight, where do I start?
The day-to-day reality for most people invested in the stock market is a lot more conservative than the film version. Many investors won’t throw huge lump sums into the market and will instead make small contributions regularly.
Typically, investors begin their journey through the purchase of shares or funds from an online investment provider (often referred to as a platform). These things are like the department stores of the investing world. To help you choose the right provider you can have a look at our reviews (https://www.boringmoney.co.uk/best-buys/online-investments/) section to see what we make of them – and what other investors have to say as well. The main considerations revolve around security, cost and the level of service offered. Naturally, larger, more established brands will be more secure, have wider support options but may cost more to reflect this. The expected charges will hover around 0.5% for administration with an additional fee ranging between 0.25% and 0.8% for the investment.
Once you have decided on a provider, it’s decision time about what to invest in. The good news is that these days there are ‘ready-made’ options for you to avoid the agony of trying to pick a bunch of shares or funds. Services like Nutmeg and Moneyfarm will quiz you on your expectations and how comfortable you are regarding risk. This will present you with a range of ready-made investment options to choose from. In terms of decision making this is the least intensive option.
Purchasing individual shares in individual companies can be laborious due to the multitude of considerations for each purchase. It’s also a bit high-risk. Putting all your eggs in one basket. A workaround is to purchase a fund, which is collection of 25 to 50 shares which is managed for you by an expert. Have a look at what the industry calls a ‘multi-asset’ fund – these options will include a vast range of investments from around the world and it’s a sensible and easy way to get started. Vanguard’s LifeStrategy funds are one such option.
Protecting the future you
Arguably more than the risk of markets crashing, one of the biggest risks we all face is inflation . Imagine a gremlin lurking in the shadows of your bank account that cheekily nicked 3p from every pound you had. Every year. You may shrug this off, but over time this has a huge impact on savings. A recent press story demonstrated that a £1 coin sitting in a piggy bank since 1983 would have a real-world value of 32p today, in terms of what it could buy you today. If placed in stocks and shares, that same £1 would be worth around £11.66.
Food for thought. If you are saving with a 5 year timeframe or more, maybe it’s time to ‘re-brand’ investing in your mind. And consider if it could be something for you as well as Gordon Gecko?