CLARE FRANCIS:?Hello, and thank you for joining our regular personal finance podcast. I’m Clare Francis, Savings & Investments Director at Barclays. Today, I’m joined by three colleagues, Ross Patient, Mike Haslam and Catherine Penney and they’re not here because of the jobs they do, but because between the four of us, we’re all at slightly different stages of life and that has an impact on how and why we invest. We also started investing at different ages and for different reasons. So, hopefully our conversation will help bring to life how the factors that influence investment decisions can change over time and vary depending on your personal circumstances and what your goals are.
Before we start, I need to remind you that when it comes to investing, stock markets can fall as well as rise, so there’s always a chance you could lose some money. Also, we don’t offer personal advice, so if you’re unsure about next steps, please seek independent financial advice.
Firstly, Ross, Mike and Catherine, thank you for joining me. Let’s kick off by finding out a bit more about when and why you began investing. Ross, you’re the whipper-snapper among us and have been investing for the shortest amount of time – what was it that got you started?
ROSS PATIENT:?A few years ago was fortunate enough to get access some money that my aunt had been putting away for me instead of giving me Christmas and birthday presents and I decided to invest it as I was trying to build up a deposit so I could buy my first flat.
Now I work in investments, it sounds very risky but I invested it all in Amazon shares.
CF:?You say it sounds very risky and it is a high risk approach because obviously if you only buy shares in a single company, your fortunes are dependent on the performance of that one company so if the share price falls, it’s not good news. But, do you know what – you’re not alone and certainly having spoken to the behavioural finance team here at Barclays, this is something a lot of people do when they first dip their toe into the water with investing.
So how’s it turned out? Did you stick with just Amazon shares?
RP:?It’s turned out well as I’ve recently had an offer accepted on my first flat, but no I didn’t just stick with Amazon. A benefit of my job is I’ve learnt more about investing and now invest mainly in funds to give me greater diversification and hopefully a smoother ride to reduce the risk of me losing money.
CF:?Mike let’s bring you in here because I know you’ve always invested in funds and Ross has just touched on the point about diversification.?
MIKE HASLAM:?Yes, I started investing back in the late 1990s, into funds. My first job with a fund management company taught me a lot, and I simply invested a bit each month into a handful of funds from those companies. And as Ross mentioned, the reason why funds are so helpful when it comes to investing, is because of the diversification they offer – a single fund will invest in multiple companies so as an investor you don’t have to worry about how individual companies are doing. You just leave it all up to the fund manager.
I’ve lived long enough to appreciate that shares do fall, but they recover. OK, well, they don’t all recover but if you invest in a Fund that holds a number of shares, the chance is that more shares will recover than go bust.
And I’m comfortable with that.
I think the danger these days is being able to see the value of your saving online or via an app every single minute of the day you see values dropping a ￡100 a day, then back ￡100 and so on….but I’ve learnt that’s part of what goes on and just to ignore it.
CF: Yes, and that’s important isn’t it – it’s sometimes hard, particularly when you first start out investing, to ignore short term movements in the value of your investments, particularly if it’s a turbulent time in the markets and it’s usually these occasions when the stock markets make the main news headlines and it can be quite unnerving. But I think it gets easier not worry overly about volatility as you live through these experiences and see that on the whole, things recover.
Now Catherine, you didn’t start investing until a bit later did you?
CATHERINE PENNEY: That’s right. Until I was about 40 I was lucky enough to be in a final salary pension scheme so my pension took care of itself. And I didn’t have any extra cash to invest. Everything went on paying my mortgage and supporting my family. When I changed employers I moved into a defined contribution pension scheme and took an active role in choosing the funds that my pension was invested in. As my children finished university and I repaid my mortgage I have been able to fund an Investment ISA.
CF: And that’s another important point – sometimes you just don’t have the spare money to invest, or even save. But that’s ok – I think there’s a big difference though between those who are engaged in their finances and those who aren’t and what we want to encourage is for people to take an active interest in their finances recognizing that your situation change over time.
MH: I agree. My investing has been stop start over the years and I’ve never really sat down and made a plan saying “I need this much for this event” but I’ve been very glad that I’ve done it and had money to fall back on.
Most recently, it was to help pay for an extension on our house. Oh, and last year I bought a small car for my son to learn to drive in. And coming up is University which my parents tell me is expensive!
Longer term…I guess having the ability retire at some point would be good. But what makes it easier is having the flexibility to stop and start, so it’s not like paying the mortgage when you must make them payments every single month. There are times when I can’t save, so I simply don’t, then I’ll just start off again sometime in the future.
CF: I’m similar – I started investing about 15 years ago but there have been times when I’ve not been able to afford to invest, and there was a period before my son went to school when I had to dip into my investments because my childcare costs were so high. I’m widowed and because in the pre-Covid days I traveled quite a lot for work, I needed a nanny so was fortunate that I had money to fall back on to cover that cost.
And actually, because of Covid, I’ve been able to invest more over the last 12 months than I have done for years because I’ve not been spending as much and I’ve actually started to plan in a way I’ve never done before.
But Ross and Catherine, I think probably more structured in your approaches than Mike and I…
RP: I try and be well disciplined in putting money to work as soon as I can as I know the feeling of sitting out and missing out on the market moving further and further upwards, and now I’ve paid the deposit for my flat, I will invest to help pay off the mortgage and maybe sit some money away to pay for future expenditures e.g. helping my kids through university/private school fees. This sounds a bit crazy at my age but would be great to have my future problems solved with a much smaller financial burden if I take action today.
CP: I wasn’t as structured and disciplined at Ross’ age, but now my cash savings accounts provide my rainy day / household disasters pot, and my investments are for the longer term trying to build a retirement pot alongside my pension so I have flexibility in the future.
Even though I’m approaching retirement and will be able to take an income from my final salary pension savings, for my defined contributions pot I still need to take a long term view, as I don’t plan on buying an annuity. Instead, I intend to drawdown my pension income from a SIPP so I want to maintain broad market exposure as I’ll still be invested for many years to come. I have increased the proportion of my portfolio in bonds to try to counter balance the equities but I continue to take a long term view. I remain confident that whilst there may be short term volatility, I believe investments will offer me a better return over the longer term, and I also believe that is the only way my pension pot will keep up with inflation.
CF: Yes, inflation is important and something a lot of people don’t take into account. The common perception is unlike investments, cash is risk-free and while it’s true you won’t lose money if you keep it in a cash savings account, returns on cash often struggle to keep pace with inflation so over time your spending power can reduce. And particularly at the moment with savings rates so low, a key reason to consider investing and not keep all your savings in cash is the potential for that better longer term growth.
So finally, based on your own knowledge and experiences, what tip would you give people about investing? Ross…
RP: I think dipping your toe in is the hardest part. I’d start by investing a small amount into something that is set up to meet the level of experience you have, something like a ready-made portfolio or if you’re really unsure then I’d use a service which does takes your personal situation into consideration and invests on your behalf. But whichever way you choose to go I think getting some money to work and getting used to the experience of investing will really start to set you up nicely for getting your money to work (outside of a savings account!) and starting your investment journey.
CF: Catherine, what’s your tip?
CP: The most important thing is to be comfortable with your investments. They mustn’t keep you awake at night and if you’re not confident making your own investment decisions then get financial advice.
Also, when you can afford to set more aside to save for the long term / your retirement don’t put your head in the sand - I did for a while. You need to act otherwise you’ll run out of time. It’s easy to put off things like pension planning but suddenly you discover that you don’t have much time left.
CF: And Mike?
MH: Learn about what the stock market is. There’s a perception that it’s a big dangerous place where billionaire hedge funds make millions a day by risking everything! But nothing could be further for the truth. It’s just a place where you can buy a shares in companies…which means you own a bit of that company. So, let’s say for example that you buy shares in Tesco, then you own a little bit of that company. Tesco is open every single day and people spend money there every single day which means Tesco is making money every single day. And because you own a little bit of the company, then you get a share in those profits. And that’s it – simple the stock market is a very interesting place worth learning about.
Forget ‘get rich quick’ schemes. Don’t think you can time the market and get rich quick by buying in one day and selling out the next. That’s just for show in Hollywood films! There’s a great line I heard somebody say once – “get rich slow”. You invest a little bit and just sit back and forget about it. THAT seems to work for most people!!!
CF: Perfect point to end on. Thank you all, that’s been really interesting and hopefully there’ll be something in what we’ve covered today that will resonate with everyone listening.
I really hope you’ve found this useful. We’ve got lots more content to help with your investment decisions in the Smart Investor and Wealth Management sections of barclays.co.uk. We also offer different ways to invest.
If you want to manage your investments yourself and are comfortable about making your own investment decisions, Smart Investor could suit your needs. However, if you’re looking for help or don’t feel you’ve got the time to do it yourself, we’ve got our digital service Plan & Invest where our investment experts select and manage your investments for you.
And anyone with more than ￡500,000 in liquid assets, could be eligible for our Wealth service which provides financial planning and investment advice.
That’s it for today. Thank you again for joining us and I’ll be back with another podcast next month.