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Elizabeth Pearson
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It’s Never Too Late: The Time To Invest Is Now!

A woman in a swimming costume stands poised and ready to dive off a rock into the sea

You have made up your mind to start investing in the stock market. Hooray! But things could be looking a little up and down with the economy and/or the state of the world, so how do you know when the best time is to start?

This article will explore questions related to time and investing; when to start investing, how long it takes to do and reach your financial goals, as well as the importance of leaving your investments alone for as long as possible.

Read on to find out when you should start!

WHEN IS THE RIGHT TIME TO START INVESTING?

One of the most common questions beginner investors ask is, “When is the right time to invest?”

The answer is that once you have a few things in place for your financial security (a fund for expected, unexpected events and a cash safety net) then start as soon as possible! 

There is a well-known saying when it comes to investing “it’s not about timing the market, but about time in the market,” 

Timing the market refers to trading rather than investing.  Traders are doing their best to predict what the stock market will do and are buying and selling stocks and shares in the short term to make a profit. 

Timing the market perfectly is nearly impossible, even for experienced professionals! As no one actually knows what the stock market will do. 

So, What Is Investing?

Investing is buying and holding stocks and shares for the long term.  One of the key principles is to leave your money invested, especially through all the ups and downs. By maximising your time in the market you always harness the underlying upwards growth in the stock market.  This will be enhanced by the magic of compounding. 

More Time In The Market Means Greater Returns 

Time has shown that falls in the stock market tend to be concentrated in short periods of time and the biggest gains are often clustered together. 

If you react to falls in the stock market, sell your investments and then wait until things have calmed down a bit you are likely to miss the ‘good’ days when share prices increase significantly. Days which no one can predict!  Historically, many of the best periods for stock markets have occurred during periods of extreme volatility. 

Leaving your money in the market means your investments will benefit from these.  If you are trying to work out when these days are going to be you are more than likely to miss them and harm your long-term returns. 

Doing nothing is the best policy! 

HOW MUCH TIME DOES IT TAKE TO INVEST?

The time needed to invest depends on whether you pay a financial advisor to invest for you or you decide to invest yourself. 

Option 1: Financial Advisor

When you employ a financial advisor (for a percentage fee) you will meet them at the start to look at your financial situation and goals.  The advisor will put together a financial plan, provide some options and manage your investments for you. After this you meet with them every 6 or 12 months to review your progress and make any adjustments as required, to meet your goals or in response to any changes in your circumstances. 

Option 2: DIY Investing

If you want to invest yourself then you will need to spend some time learning how to do this.  Don’t worry it’s simpler than you think!  You do not need to know or understand everything, only some simple principles that you put into practice consistently and online. You will then be able to open a tax efficient account (Stocks and Shares ISA or SIPP) with a robo-advisor/online broker, put some money in and choose some investments yourself. 

As a DIY investor you can invest in funds or learn to choose a portfolio of individual stocks and shares. Simple investing in funds can be learnt and set up in a few hours and then be left alone. It is then good practice to review your investments once a year. 

More adventurous investing (buying a portfolio of shares of individual companies) does require more time to understand and learn.  But you don’t need to spend hours in front of your computer watching charts go up and down. The important thing is to have a strategy.  On an ongoing basis, you then need several hours every few months or so to rebalance it.  This means selling off the shares not doing well and replacing them with ones that could do better.

What About Trading?

Trading meanwhile requires a much bigger time commitment. In Live on Less, Invest the Rest, Andrew Craig states that you need the equivalent of at least an A Level’s worth of study (more like a degree) before you will be comfortable and any good at it. Even when you have put this time in you still need a significant amount of time on a daily basis to trade.  There is no guarantee of success, it is time consuming and can also be an emotional roller coaster.  

HOW LONG WILL IT BE BEFORE I CAN QUIT MY JOB?

The desire to quit the daily grind is a common motivator for many investors. The purpose of investing is to reach financial independence or freedom by having a passive income. A passive income is money generated from something other than an employer or a contractor i.e. you are not selling you time for money. It comes from assets that require only minimal monitoring on an ongoing basis. With a passive income, you can then choose to work or not. 

The timeframe for achieving this goal varies significantly from person to person and depends on whether you are aiming for ‘financial independence’ or ‘financial freedom’. 

Financial independence means that you are debt free and have assets (and this may not only be stock market investments) that provide you with an income that is the equivalent of your current lifestyle. 

Financial freedom is a level of wealth beyond beyond this. You can afford your current lifestyle as well as being able to afford the things that you want living your ideal life, without any financial constraints. 

The assets needed to be financially independent or financially free are different for everyone and depend on their current financial position and current lifestyle. If, for example you need £2000 per month to cover your living costs you will need a smaller pot of assets to provide this as a passive income than if you need £4,000 or £6,000 per month to live on. 

You can use this financial calculator to work out much you need in assets to be able to stop working/retire.  

SAVE TIME BY HAVING A STRATEGY AND STICKING TO IT

If you use a mediocre strategy consistently, you’ll beat almost all the investors who jump in and out of the market, change tactics in mid-stream and forever second guess their decisions. Successful investing isn’t alchemy; It’s a simple matter of consistently using time tested strategies and letting compounding work its magic.’ 

James O’Shaughnessy, What Works on Wall Street

Successful investors have a clear strategy and stick to it. They are consistent and boring rather than random and whimsical!  

This approach will save you both time and energy time setting up and managing your investments on an ongoing basis.  You then don’t need to worry about and get can get on and enjoy your life, knowing your money is working for you.

THE TIME TO INVEST IS NOW!

A simple strategy to get your money working for you now can be done alongside your life and in the time you have. Leaving it alone for as long as possible is the best way of achieving financial independence and creating a brighter future for yourself. 

Investing in your financial education is the first step in doing this.

If you want to learn more, you may want to check out these blogs from our archive: 

Why Is Investing So Scary? And Why You Should Invest Anyway

So You Want To Start Investing? Here’s How To Do It Simply And Sustainably

 

Elizabeth Pearson
In .

Female Investing: The Gender Gap & How To Bridge It

While the absence of women from the investing picture has been researched, written about and highlighted over recent years there is little sign that this gap is reducing. The number of women employed in the financial sector is low, the amount of money women have invested compared to men remains small and the lack of confidence women feel in investing still gets in the way.  In this post, we’ll look at what this gap is, why it exists and how to make investing more accessible for everyone.

FEMALE INVESTING:  THE CURRENT STATE OF THE GENDER GAP

The gender gap in investing is considerable.  Women make up about a quarter of senior roles in the investment industry, received 1% of venture capital funding and a only a seventh of start up funding in 2021.  But the gender gap is not just a matter of female representation. The amount of money women have invested in stocks and shares is paltry compared to their male counterparts.  According to recent research from Boring Money:

  • 3.3 million fewer women hold investments in the UK compared to men (the equivalent of three times the population of Birmingham).
  • Men in the UK have £599 billion more than women in ISAs, investment accounts and private pensions.  This is greater than the GDP (Gross Domestic Product) of Switzerland.
  • The average private pension is £99k for women, £39k less than men (the average for men is £138k).
  • Only 22% of women feel confident making investment decisions versus 41% of men. 

WHY IS THERE SUCH A BIG GAP BETWEEN MALE AND FEMALE INVESTING?

And why is it so persistent?  It comes down to three things:  income, communication and culture. 

1. Women have less money to invest 

The Equal Pay Act was passed in the UK in 1971.  Fifty years later the gender pay gap is still 15%.  Women spend less time in paid work because they have children and have greater caring responsibilities.  They thereby lose earning potential, often pay the bulk of (expensive) childcare costs and also live longer.  All these factors mean women have less disposable income and less money to invest in their financial future.

On top of this women have the false perception that they need a lot of money to start of investing.  The £20,000 limit on how much can be put into an ISA every year is perceived by as the minimum to invest.  Actually the minimum needed to open an account and start investing is £25.

 2. Women are excluded from the world of finance 

The financial sector is still overwhelmingly male, pale and stale. Until 2019, of the 1496 listed investment funds in the UK there were more managed by men named Dave (108) than the total number of women who were fund managers!

The biggest barrier to women  investing is that they (quite understandably) want to understand it all before they begin.  But riddled with the most dreadful jargon the finance industry simply does not speak to anyone in simple straightforward English, take into account what motivates women or address the reality of their lives. 

Financial products are designed for and aimed at male customers while the word ‘risk’ is bandied about all the time (how about using the word ‘uncertainty’) creating a fear for women about even starting.

 3. Women are told they are not good with money

False stereotypes about gender are still influential in our society today.  Women were traditionally considered as overly emotional, irrational and lacking the intelligence and logical faculties of men.  Judged as less capable and able to properly manage their personal finances it was seen for her own good that a woman was not allowed to control her own financial situation.  It was only in 1975 (not so long ago!) that a British woman could open a bank account and apply for credit and loans in her own name, without her husband’s permission.

These stereotypes prevail with a gender bias in the images of money and investing in the media.  Men are advised on investment strategies with images showing wallets of cash.  Women are targeted with pictures of saving pennies and piggy banks or told to stop splurging and buy fewer shoes. 

WHY DOES ALL THIS MATTER?

Getting your money to work for you by investing is a powerful way to increase personal prosperity and provide greater independence and freedom.  Through the investment choices we make we can align our money with our values to make a positive social and environmental impact as well as making  financial returns. Women (and in particular younger women) are more likely to invest (or invest more) for social and climate impact if they could invest with a clear goal or purpose for good.

The fact that women are less likely to invest compounds their already existing financial disadvantages, choices, freedom and influence in the world.  It gives them less of a voice.  Bridging the investment gap is critical for women’s personal prosperity, financial equality, for society and our planet.

BUT THE THING IS … WOMEN ARE BETTER INVESTORS!

Although fewer women invest when they do their returns are better.  A study of more than eight million investment accounts by Fidelity revealed that women outperformed men by around 0.4% a year.  Later research by Warwick Business School showed the gap to be even bigger, with women outperforming men by an average of 1.8% over a three-year period.

This is because women buy and hold their investments for the long term with their future goals in mind, invest in a wide variety of things and do not lose money by taking punts on things.  Women prefer a slow and steady, boring is best investment style.  And while the difference in performance does not seem that much as a percentage, if you factor in the magical force of compounding this this can make a huge difference in financial returns over time.

IT’S SIMPLER THAN YOU THINK (OR ARE TOLD) TO START INVESTING

So what can we do about all this?  Apart from sorting out equal pay, creating an inclusive financial sector and overturning the system we are in….?!?  Well, to get going with investing the best thing is to start investing NOW!

With your financial foundations in place (an emergency fund, a cash safety net and paying off consumer debt) you can start investing small and simply and get going with growing the financial future you want for yourself.

Investing is something that can be learned and the principles behind it are very simple.  It is about making up your mind to invest in your financial education.  Take a bit of time to learn the basics so you can understand and get your money working for you.  Read a book, learn your Investing Basics on You Tube or attend an Investing Taster Class with me. Know also that you can invest for purpose and profit, your money can back things you care about and avoid things that you don’t want to have anything to do with.

If you’re unsure where to begin or want to learn more about how I can help you bridge the gap, get in touch. We can have a free, no-obligation chat to work out how you can start investing for your future.

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