Investing is no longer the preserve of moneyed men of a certain age. It’s something anyone who cares about their financial future should consider.
UK inflation fell to its lowest rate in almost two years in November (from 2.3% to 2.1%), prompting speculation that the Bank of England is unlikely to raise interest rates soon. Contrast this with the fact that stocks and shares ISAs returned an average of 4.8% during the last tax year, while UK-listed firms paid record dividends, and it’s no wonder consumers are reconsidering cash savings in favour of investing.
The old adage that investments can go down as well as up remains true, but investing makes sense for anyone keen to see a high rate of return over the long term. Yet a common misconception prevails; that cash savings are safe, whereas investments are risky.
That’s not true, according to Adrian Lowcock, head of personal investing at investment platform Willis Owen. He believes anyone looking to save money over a period of 10 years or more should seriously consider investments.
“Cash savings aren’t what they once were, and don’t deliver over the long term because they offer interest rates below the rate of inflation. That means the spending power of your savings actually falls over time,” he says.
“More than ever before, we need to invest for retirement.”
Opening a cash Isa is one thing, but investing in stocks and shares can feel scary by comparison. Lowcock thinks we should see it as a natural progression, and says investing isn’t as risky as its reputation suggests.
“If you’re investing for the long term, there are ways of building a portfolio that aren’t high-risk,” he says. “While there’ll be lots of volatility in the underlying investments over the long term, investments in stock markets generally go up over that time period.”
With so many fund options out there, picking solutions for your own investment can be complex. Willis Owen has developed a virtual investment tool called Play, which enables users to become seasoned investors without parting with a penny. It replicates what happens on the stock market, so users can research funds and invest up to £10,000 of virtual money in a portfolio.
“It’s like taking a car for a test drive before you buy” says Jason Chapman, managing director of Willis Owen. “With little or no investment experience, you can get to grips with everyday investment risks and opportunities, and experience everything from picking a sum and making an investment decision to handling the transaction and monitoring the portfolio.”
A virtual investment tool helped Andrew Buchanan, 24, get to grips with investing in the US stock market. “I wanted to better understand what influenced the share price of the major blue-chip companies in the US, so my goal in using the tool was to test my theories on various pieces of financial news, without putting any capital at risk,” he says.
“I’d read about various trading strategies, and the tool enabled me to put them to the test to see how they played out in practice. I also wanted to learn more about the metrics that were available, and I could see the sort of data people were using in the pits.”
Virtual investment tools aren’t just for those who are new to investing, however. Seasoned investors can replicate their live portfolio and try out different investment strategies risk-free.
Jacqueline Mitton has been investing in unit trusts for more than 30 years, managing her own portfolio for most of that time. Using Play allowed her to experiment with an investment strategy that she was too nervous to apply to her live portfolio.
“In my live portfolio, my investment strategy has been rather cautious; I’m not a risk taker by nature, and I didn’t imagine I’d invest in any of my Play funds in the real world,” she says. “But building on what I’ve learned, I’ve now decided to put aside a sum of money for investing more adventurously.”
Owning your financial future can be a daunting prospect. But using investment products is as easy as any other money-related activity, be that transferring your balance to a new credit card or taking your lunch to work to save cash. A virtual investment tool can help users develop confidence – the lack of which holds many people back from investing.
“There’s a conception that investing is complex, but the actual transaction can be done as easily as buying something from Amazon,” says Lowcock.
Nonetheless, there’s a big difference between spending £5.99 on a book and putting £1,000 into an Isa. “Investing is a completely different feeling and experience; it’s not a physical product and you don’t get next-day delivery on it. Play enables you to gain essential expertise and build confidence before taking that first step.”
With a live investment portfolio, mistakes can be costly. With a virtual tool, you can apply valuable lessons learned to your live portfolio. “You will make mistakes as an investor, regardless of whether you’re new, very experienced or even a professional, but how you handle those mistakes is crucial to your success,” says Lowcock.
“One of the biggest investing mistakes most people make is selling the moment their investments fall in value and the markets drop, but with a virtual portfolio you can afford to wait and watch it recover, because you’re not losing anything.”
It’s no surprise that people put off decisions about investing, but Chapman recommends spending as much time planning for your retirement and financial future as you do planning your next holiday. You don’t need a meaningful sum of money to invest, either.
“People worry that their investment could fall significantly in value, but that’s unlikely to happen if you’re well diversified, and you can start investing with as little as £25-£50 per month,” he says.
“Don’t put all your eggs in one basket; buy a range of funds to reduce the risk and ensure you’ve got exposure to other markets beyond the UK, where people are concerned about Brexit,” he advises.
“If you’re not putting too much in up front then just enjoy the experience,” adds Lowcock. “And remember why you’re doing this – for your family’s future.”
