Investing is one of those things that we hear so much about, but can be so mystifying, particularly if you’ve pictured it as something for citybankers or the super-rich. It’s easy to see why, particularly with so many lost pensions, market crashes, and get-rich-quick scams, not to mention the jargon makes it all feel like a secret code to keep regular people out, but the truth is that investing isn’t rocket science or gambling. It is, however, a slow, steady way to make your money grow faster than inflation eats it away, so let’s show you ways to make sure you feel empowered rather than overwhelmed:
Property Investment Is Still a Big Winner
It can be daunting, but many nervous beginners can dip in without committing forever. The fact is that houses are always in demand, and if you can make the most of fast bridging finance options to let you grab opportunities quickly, such as buying at auction or bridging a house sale gap, this can help you without waiting for traditional mortgages.
You could spot a bargain fixer-upper, which is where a bridge loan can cover it fast. A home is always in demand, so you could sell, refinance, or rent out, just make sure that you work with FCA-regulated brokers who will explain everything without pressure, ensuring that you’ve got Plan B in your back pocket.
Risk Is Partially a Myth
Many people worry about losing everything, but of course, it’s valid that you don’t want to see your savings disappear, but you do need to remember that long-term investing is not about gambling; it’s about making sure that you’ve got a long-term plan.
Markets dip like 2008, but they recover and then climb higher over a period of 10 or more years. When you look at the FTSE 100, it has averaged 6% to 8% annual returns after inflation historically. Compare this when you leave your cash in a bank at 3% while prices rise between 2% and 3% yearly!
Therefore, be sure to diversify and look at something like no more than 5% in one stock. There’s plenty of great guides out there as well, for example, the Moneybox app, which allows you to invest in a stocks and shares ISA with a lot of information on what it’s all about. But don’t forget when you invest, it’s not about putting all of your eggs in one basket; it’s about making sure that, in fact, you can invest what you are prepared to lose.
The benchmark is, according to people like Tony Robbins, 10% of your salary in times that are tough, but whatever little you can invest and then pop it into a calculator that shows you through the magic of compounding how much you have earned, then you may be able to breathe easy and look forward to retirement.
Use Tax Wrappers Like SIPPs and ISAs
UK wrappers are like free shields, so a stocks and shares ISA will shelter you from £20,000 yearly from capital gains tax and dividend tax. You can put in £100 a month, and then if it grows to something like £150k, you can withdraw it tax-free.
If you’ve got a SIPP for retirement, you can contribute £80 and then get between £20 and £45 government top-up instantly, and then withdraw from the age of 55 tax-free up to 25%. The great thing about ISAs and SIPPs is that they are flexible and you can open them in 10 minutes through platforms like Interactive Investor or Vanguard with no branch visits.
Diversifying Early with Funds and ETFs
Picking stocks solo is like betting on one horse. Funds and ETFs bundle hundreds, so if one sector tanks, another may soar. If you are hearing about these things, then you may be worried about the fees, but the fees themselves can be 0.1% up to 0.3% every year, versus 1% to 2% for active funds that tend to underperform.
Pound cost averaging is the thing that will bust your fear wide open, and if the price is low, you buy more shares, but if they’re high, you buy fewer, which means that over time they average out and without any timing stress.
Start Small and Compound Your Way Up
Don’t worry about how much you need to invest. This is why the magic of compounding is something we should all remember, because if you invested £100 a month at a seven percent realistic return, you are looking at £200k in 40 years’ time!
This is where every little penny can make all the difference to your future because apps like Plum can round up purchases, and you can then build as you go. Always remember that there’s no point in tracking daily because this would only add to your panic; it’s about making sure you set it and forget it. Track it or delete it instead.
Understand Stocks, Bonds, and Alternatives
Stocks are company slices for growth, which can be riskier but have higher reward, bonds are like IOUs to say issuers like governments and provide a steady 3% to 5% income and you can then mix both for balance around 70/30.
There are other alternatives, for example, gold ETFs and REITs, which are property funds without landlord hassles.
Plan Your Goals and Regularly Review
Rather than checking all of the time, just have a look every year. Pin your goals and understand what you want to achieve, for example, retirement in 20 years or an emergency fund that may require three or six months of cash.
If you’re looking for the long term, put your money in your stocks. Don’t forget as well that the FSCS will protect £85k per provider! You are mapping your path, not guessing it!
There’s a lot here to unpick, but hopefully this one-stop shop has made a bit of sense and can get you started on a path that feels right for you. Whether it’s real estate investments that could be very stressful for you, you may find better luck with a stocks and shares ISA or a SIPP. Investing shouldn’t be scary, and in fact, the thing to remember is that you’re capable, so start tiny, learn as you grow, and reclaim your financial future!