A lack of knowledge can often be a reason why people fear investing. But can you overcome the need for knowledge? And do you even need to?
Overcoming a lack of knowledge
For many of us the concept of investing is complicated and, as a result, we avoid it. But, with so many options out there for all types of investor, this shouldn’t be the case.
Part of the unwillingness to start investing comes down to a lack of understanding and knowledge. In life it is often the case that we stick with what we know, ignoring other options when there could potentially have been a better one.
This attitude is often applied when we think about investing in the stock market, and goes someway to explain why so many of us park our money in cash; it’s what we are familiar and comfortable with. However, with interest rates at historically low levels, you won’t be getting a decent return on your hard earned cash, which is why investing can be a good method to try and build your long-term wealth.
Starting your investment journey
If you’ve decided to take the plunge and put your money to work then you now have a few decisions to make. Firstly, you’ll need to choose a platform. These are essentially like banks, but specifically for investment accounts. We’ve worked hard on making our platform easy to use, transforming our website and improving our app through our recent digital transformation initiative. Our award winning customer service team are always there if you need any help, too. Platforms will have different charges and structures, but will generally allow you to access the same type of accounts.
At this stage it’s worth considering an ISA as the government sets an annual allowance each tax year, which was £20,000 for 2019/2020. This makes them a good starting place as it’s harder to invest too much at once with a set limit. ISAs are also free from UK income tax and capital gains tax, meaning any profits made are yours to keep.
There are a variety of ISA products to choose from. You can either make the investment decisions yourself with a Self-Select ISA or have it done for you with a Ready-made ISA. If you’re between 18 and 39, you can take advantage of a Lifetime ISA, a dedicated account for first-time house-buying and retirement planning, with a 25% government bonus when you withdraw for one of these events.
What to invest in?
Even after you’ve picked an account, you’re still left with another vital decision: what do you invest in? There are a whole range of investments out there doing very different things. If you are a keen reader, you can get up to date with how markets work, what the opportunities are, and quickly get a good sense of where to best put your money. The amount of information available at the click of a mouse can make anyone a reasonable investor. However, for those not willing to fully immerse themselves in the world of investing, there are still options.
On our website, we have a number of preferred lists of investments available to anyone. You can look for individual shares such as BP or HSBC, or you can see which passive investment funds we like. These generally allow you to track the fortunes of various stock markets, giving you a spread of stocks. This means that even if one stock falls, the others will most likely cushion it. There are many low cost options available, perfect for the novice investor. You can also look at our preferred list of funds if you would like someone to do the stock selection for you. By doing this, you will have exposure to a range of investments managed by a professional fund manager who will invest on your behalf.
Don’t know what to invest in?
If you would like to remove the decision of which market to invest or which fund manager to pick, then a Multi Manager Fund, or MMF, could be the solution. MMFs have dedicated experts who select the underlying investments for you. They carefully handpick what they view to be the best combination of funds in order to provide a single investment which removes the pressure of having to find and monitor individual fund managers and their funds.
We offer a trio of funds appealing to investors with varying risk appetites and investment goals. If you’ve been putting off investing because you don’t know which funds or investments to invest in, then these can easily help set you on your way. You will need to decide whether you want income, growth, or a combination of both. The rest you don’t have to worry about, and can leave to us.
Benefits of Multi Manager
At the cornerstone of these type of funds is diversification. This is a technique that reduces risk by spreading money across different sectors, regions and types of investment. Arguably, diversification is the most important component of reaching long-term financial goals while minimising risk. For a novice investor it can be difficult to achieve this, so letting an expert do it for you is certainly worth considering.
MMFs also have the potential to generate more reliable returns. This is achieved by investing in a diverse combination of other managers, meaning the fund won’t be overly exposed to one theme. As a result, downswings in performance of one manager when market conditions don’t favour their approach are smoothed out by the performance of other managers.
You will be exposed to the expertise of multiple investment experts. Firstly, there is a level of expertise involved in conducting extensive research, selecting the right managers and putting those managers together in a way that finds the optimal balance of risk and performance. We have a rigorous process where we crunch the numbers and talk frequently with a large number of managers in order to seek out the next opportunities. Secondly, you will have exposure to the skill and know-how of managers in control of the underlying funds. These individuals or teams are at the top of their game and have honed their talents over multiple years.
Lastly and perhaps most importantly, MMFs are simple. They remove the need for knowledge and research of several different funds, and instead mean you only have to invest in one.
The most important things to remember are to never invest more than you have to lose and never let anyone pressure you into making decisions for you if you don’t understand. While we can’t advise you, our Funds team will happily speak to you if you need any more information. Our Multi-Manager pages have loads of additional information and resources too.
All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.