Inflation is destroying the nation’s savings. The interest rates paid by banks and the nest eggs we have are very low.
Your money’s value will be diminished if it doesn’t grow at the same pace as the cost to live. Now is the right time to get involved, with inflation predicted to hit 6 percent in 2019.
According to money experts, households need about three to six month’s worth of expenses saved in cash savings accounts.
Savings is better than investing: Money that isn’t increasing at the rate of the cost to live is losing value.
But anything more — that you do not need to hand — could be growing at a far better rate on the stock market.
Watchdog the Financial Conduct Authority is so concerned about the effect of inflation on the nation’s nest eggs that it has launched an £11 million campaign to make us a nation of smarter investors.
Many loyal, long-term savers might be nervous about investing their savings in the stock market.
So Money Mail reached out to expert to learn their top tips for taking that first step. We also asked them to recommend a good fund. The fund’s past performance has been included.
For reference, £10,000 left in an average easy-access savings account would now be worth just £10,180 after five years.
Your best financial adviser is you
Peter Hargreaves is the co-founder of investment firm Hargreaves Lansdown and writes about how you can get started…
Get started: Hargreaves Lansdown founder Peter Hargreaves
There were many good reasons for investing and learning how to invest.
These include not being able to spend enough time, not trusting advisors and fear of losing your money.
General malaise among would-be-investors has resulted in billions of pounds languishing in poor arrangements — notably deposit accounts with minimal interest.
Anyone with enough capital to invest in something knows that they must do it, but most people keep delaying. They have two main questions: “How can I start?” The most important questions they have are: ‘How do I start?’ and ‘Where do you get the best advice?
My firm belief is that you should start with a modest investment. Once you are able to comprehend and possibly spark interest, you can start to make an investment. If you are optimistic, it will be easy to follow and research any details about the investment.
My 50-years of experience in the investment industry has led me to conclude that you are the best advisor.
This may seem silly to beginner investors, but it is important to determine your risk tolerance.
It is almost impossible to assess the risk profile of another investor. Risk can mean different things to different people. Only you can determine what risk is to you. It can be very expensive to get advice.
My mantra is that it’s best to not invest in anything you don’t know. This doesn’t necessarily mean that you have to be able to read every report and account of the company, but you must at least understand why you’re making this investment.
It’s easy to say, “I purchased something from them recently. The customer service was fantastic.” This could make it easy for you to start looking into possible companies that might be worth your investment.
Oder “I visited there on holiday, and they seemed to have a lot of success” could be a reason to look at investing in the region.
However, tipping at the pub and golf club can be a bad idea. It is not clear what the tipster means by tipping it or why they expect the cost to go up.
You can start investing by buying shares in a safe, well-managed collective investment.
Let’s begin by explaining the reasons you might buy shares in a company. This is a simple concept. Today, profitability is what businesses are judged on.
The Financial Conduct Authority is so concerned about the effect of inflation on the nation’s nest eggs that it has launched an £11m campaign to make us a nation of smarter investors
A business that makes more profit will likely see its stock price rise.
Businesses that are profitable and run well aim to increase their profits. This means that shares in these businesses must increase in value, and allow wealth to grow.
Start with a managed collective investment. An investment trust, or unit trust, that is well managed has the benefit of carefully selecting the investments and being constantly monitored by an investment manager.
You also get instant diversification because they have stock in multiple companies to spread risk.
However, it is important to do your research. You may be able to get an idea of what you want by doing your own research.
Are you looking to increase your wealth, gain income or invest in technology, healthcare, or a specific geographical region (e.g., emerging markets, the U.S.).
You can start by searching in these areas for potential investments. The most important thing to do is get started.
To start small, invest a little to learn and continue investing as your comfort level increases. Start small to ensure you don’t put too much in the way.
But whether your investment is for £100 or £10,000, you will develop a keen interest and start learning from your wins and losses and get the bug for finding out more.
Few people are happier than those who have started to invest in a rational and orderly manner.
Blue Whale Growth Fund shares are a great way to feel secure. I was first exposed to investing with blue chips. This is the name that was given to the biggest and most secure companies.
Blue Whale Growth Fund members are more valuable than the blue chip companies of yesterday. These companies are sometimes larger than the whole UK stock exchange.
Alphabet, Microsoft (Google), and Mastercard are in unassailable position on their markets, increasing profits, and realising outstanding shareholder value.
Prudent Investor: Tony Hazell
First-time investors often make the biggest error of investing too much money in the UK.
FTSE Tracker Funds may seem cheap, but they have historically tended to lag behind America in particular.
You can take money slowly, rather than a huge lump sum. This will ensure that you’re not scared off by an abrupt market decline.
Look at falls as a purchasing opportunity, rather than selling to crystallize losses.
However, it is important to review your holdings and make adjustments where needed.
Vanguard Global Equity provides decent exposure worldwide without holding too many shares.
It is down by 13.6 percentage points from its benchmark, but it still beats the benchmark in terms of performance over the previous year. It returned 24.6 percent last year, which was an improvement on its benchmark.
At 0.48 Percent per annum, charges are very low.
The U.S. accounts for just over half of the portfolio, while Japan, Britain, and the money markets account for about 6 percent each.
Alphabet is Google’s largest holding, though it is just 1.65% of the portfolio.
Scottish Mortgage Investment trust is my favourite investment. Over five years it has turned every £1,000 into more than £4,500.
However, the current share price exceeds the actual value of its shares by almost 4 percent. Therefore, you will have to pay more for it. This increases the chance that it could be a loss leader.
Managers’ convictions determine the investment decisions. These include Moderna which accounts for almost 8% of the portfolio’s total, Tesla, and Illumina, a genetic-sequencing company. The charge quoted is 0.34 Percent.
James Anderson, the long-serving joint manager of the company, will be retiring at the end April. However Tom Slater is now the new leader.
FIRST FUND TIP: Vanguard Global Equity. Return on £10,000 after five years: £18,413.
FIRST FUND TIP Blue Whale Growth Fund. Return on £10,000 after launch in September 2017: £21,773.
It is vital to have a safety net: Maike Currie is Fidelity’s investment director
Plan ahead: Fidelity International director Maike Currie
It can be daunting for first-time investors to make the investment plunge.
You should invest for the long haul. Make sure the money you are planning to spend is not what you’ll need immediately.
You should also be able to invest. You need to have solid financial resources before you can start. It does not matter whether you’re paying off your debts or setting yourself up for success before you even start.
It is important to know your financial goals and the time it will take to reach them before you decide where to invest.
Fidelity Index World Fund makes the most sense for new investors. This gives investors access to some of the world’s biggest companies — names such as Google, Microsoft, Burberry and Disney.
The MSCI World Index tracks these companies, and your money is spread across them. You can keep your costs low while diversifying your investments.
This is a fantastic way to get a piece of fast-growing and exciting businesses. You can spread your risk over a variety of shares while still keeping your costs down.
Remember the long-term principle once you have invested. While it might be tempting to get caught up in 24-hour online business news or stock tickers, it’s crucial to not ignore daily updates.
Long-term compounding benefits are much more possible if your investments are constantly changing.
Fidelity index World Fund – FIRST FUND TIP Return on £10,000 after five years: £18,412.
Multi-asset funds are a good place to start. Andy Bell is chief executive officer of investment platform AJ Bell
Spread your wagers: Andy Bell, chief executive of AJ Bell
When choosing the best investment for a new investor, you need to consider many factors.
The time horizon of the individual and their attitude towards risk will also be important. This will determine the appropriate type of fund.
Assuming that the investor is cautious at first, a multi-asset fund with investments in different assets, such as cash, bonds and gold, may make sense.
In short, it will allow a novice investor to build a portfolio instantly. Personal Assets or Troy Trojan is a fund that can be used to make smaller investment or save monthly.
Sebastian Lyon, Manager, has a strong focus on capital protection. He aims to increase capital in the long-term while minimizing risk short-term to prevent losses.
This conservative approach makes it possible to diversify the portfolio among high-quality equities, such as Microsoft and Visa as well as investments in inflation linked bonds and gold.
The portfolio comprises roughly half in equity, 30% in bonds, and 10% in gold.
This strategy gives investors a well-diversified portfolio that they can use as a base. As the investor gains confidence and learns more, they are able to add other funds and strategies.
FIRST FUND TIP: Troy Asset Management Trojan Fund. Return on £10,000 after five years: £13,506.
Do not be intimidated by the technical jargon. Moira Oleson, Head of Personal Finance at Interactive Investor.
Straight Talk: Moira Olen, Interactive Investor’s Head of Personal Finance
You can easily become overwhelmed by all the investments that are available. The investment industry is also guilty of using too many jargon words.
One piece of terminology I advise novice investors to learn is “multi-asset funds”, as it may be the only thing you will need to get started.
Often referred to as a one-stop-shop fund, a multi-asset fund makes the investment decisions on your behalf — splitting your money across different types of investments, but mainly shares and bonds.
Interactive Investor offers six highly recommended multi-asset funds to beginners. Three of these funds are from Vanguard LifeStrategy and three come from BMO Sustainable UniversalMAP.
Vanguard LifeStrategy80 per cent Equity fund is a good option for those investors that are willing to accept higher risk, and have five to ten year to invest. It offers low-cost exposure to thousands across the globe.
The name of this fund implies that 80 percent of it will be invested in shares and the rest in bonds or other fixed income assets.
Funds investing in just a few holdings will not be protected by this fund, which makes it an attractive long-term investment option.
Although past performance does not necessarily indicate future performance, the fund has a stellar track record of performance over the last decade that beats the sector average and ranks in the top quarter of all funds within their sector. This gives the fund confidence.
FIRST FUND TIP: Vanguard LifeStrategy 80. Return on £10,000 after five years: £15,354.
You can get started by creating an Isa
Pick an investment company to get started investing. Hargreaves Lansdown Brokers, Vanguard or AJ Bell will allow you to manage all of your investments from one location.
The stocks-and shares Isa lets you buy individual stocks, funds, or both and does not tax any profits.
Access your account through a web browser or via an app. The average platform charges between 0.3% and 0.45 percent for an annual account run, as well as 0.65 to 0.85 percentage for investments.
Tax break: A stocks-and-shares Isa allows you to buy funds or individual stocks and not pay tax on any gains
Passive funds — which follow an index — are cheaper, at around 0.1 per cent to 0.25 per cent.
AJ Bell has over 2,000 funds available in its stocks-and-shares Isa. In the first year it charges 0.25 to 0.05 percent, but does not include fund charges.
Vanguard does not operate as a platform, it sells only its funds. There is an annual charge of 0.15 percent.
Boring Money has a list of 28 platforms it recommends, including the cost of using them: boringmoney.co.uk/isas-pensions/isas-pensions/.
You will need to have your National Insurance Number and details for your Debit Card in order to apply for an Isa. You can only pay into one stocks-and-shares Isa each tax year (up to £20,000).
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