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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

 

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

Young woman looks and cradles a beautiful and exotic flower in her hands.

If you’re eager to begin investing, understanding the stock market might seem overwhelming. And, if you wish to align your investments with your values, it can become even more complex. This post will provide straightforward steps to kickstart your sustainable investing journey including choosing where to invest, making your pension more eco-friendly, and finding sustainable funds. 

WHERE SHOULD YOU START YOU INVESTING?

When you decide to dive into the world of investing, you need to select an investing platform. These online platforms provide easy access to various investment options, such as funds, stocks, and commodities. 

OPTION 1 TO START INVESTING: ROBO ADVISORS

Different providers offer a variety of investments. If you’re new to investing, robo-advisors are user-friendly digital platforms that offer ready-made investment options, often with a sustainable or ESG focus.

These platforms distribute your money across various companies and business types, reducing risk and promoting diversification. Some robo-advisors exclusively offer sustainable investment packages. 

OPTION 2 TO START INVESTING: ONLINE BROKER

If you prefer to build a diverse portfolio from a broader range of investments, an online broker is your best choice. With an online broker, you can invest in a wide range of investment funds, individual stocks, bonds, and commodities. 

Boring Money is a helpful resource for selecting where to invest and comparing costs. For robo-advisors, the fee covers both platform usage and the investment package. With online brokers, you pay for the platform usage separately from the investments you buy.

As a DIY investor, aim to keep your investment costs at or below 1% of your portfolio’s total value. 

Boring Money lets you specify whether you want your investments to be green or ethical, and whether you want to use a Stocks and Shares ISA or SIPP.

SHOULD YOU START INVESTING THROUGH YOUR BANK?

Many banks and building societies offer investment services, which can be convenient since all your finances are in one place. However, it’s essential to consider the environmental impact of your bank. Some banks, like Barclays and HSBC, are major funders of fossil fuel projects.

Reviewing your bank’s ethical practices is crucial to align your money with your values, as they use your deposits to fund various projects and businesses. 

You may not agree with what they fund.

WHAT ARE YOU INVESTING IN?

Once you have chosen where you are investing, opened an account and put some money in, the question is what to invest in?

INVEST IN PENSIONS

The UK’s pension industry is valued at £3.2 trillion. If you have a workplace pension, it’s an easy way to start your sustainable investing journey by examining where your pension is invested. Many people default to the standard investment option, only to discover their money is often invested in industries like fossil fuels, arms, and tobacco. 

You can change this by following these simple steps: 

  • Log in to your pension provider’s website. 
  • Review your investments, often in the default option. 
  • Switch to a sustainable or ESG investment option. If there isn’t one available, contact your provider and request one. 

If you’re not sure where your pension is, you can use the “find a lost pension” website to locate it. 

INVESTMENT FUNDS

An investment fund is a pool of money contributed by investors to purchase various assets. These funds can encompass a wide range of businesses, from the entire UK stock market to specific sectors like clean energy. 

There are two main types of funds: 

  • Passive funds: These are computer-managed funds that track an index and have lower costs. 
  • Active funds: These are managed by individuals or teams who make investment decisions on your behalf. Active funds often come with higher fees. Most sustainable funds fall into this category. 

The market for sustainable/ESG funds has grown significantly in recent years. While assessing these investments can be complex, the industry is continually evolving and improving. 

RESOURCES TO GET STARTED INVESTING IN FUNDS

1. Fund Ecomarket, soon to be relaunched as Socially Responsible Investment Services allows you to put in a number of criteria to find funds that meet what you are looking for.  It is not a place to buy funds.  Once you identify what you want, have a look if you can buy it with your online broker.

With approximately 132,000 funds in the so called ‘fund universe’ an online broker will not stock them all.  But if there is a fund you want and it is available do call your broker and ask them to pop it on their platform. I did this and it works!

2. The Big Exchange is an investing platform set up The Big Issue. It lists only ethical and impact investments. Each is given a gold, silver or bronze medal rating. You can also choose fossil free investing and female led funds.  50% of their customers are women.

3. Monevator’s list of passive funds.  Monevator focuses on ‘armchair’ investing in passive funds. The site lists the lowest cost funds in various categories. They generally have an ESG option in each.  

ALL THAT’S LEFT TO DO IS START INVESTING!

Now, all that’s left is to start investing! Sustainable investing is a personal choice for those who want to generate financial returns while making a positive impact on our planet.

Once you clarify your goals, making investment decisions that align with your values becomes much simpler. 

If you found this post helpful, you might also enjoy reading these related articles on our blog: 

Do You Want to Use Your Money For Good? Sustainable Investing Can Help Your Wallet And The Planet

Female Investing: The Gender Gap And How To Bridge It

I’d love to have a chat.  You can book a free-no obligation call with me here or find out more about working with me on my website.

Do You Want To Use Your Money For Good? Sustainable Investing Can Help Your Wallet and The Planet.

Sustainable investing is an investing strategy which balances long-term financial returns with positive environmental or social outcomes. It is about investing for purpose and profits.

It has become an increasingly popular investment strategy in recent years, in particular amongst women.  With a growing awareness of the climate emergency investors see the need to move finance and capital into businesses that consider, address and solve this problem.

In this blog post we’ll discuss the benefits of investing sustainably, the different ways of doing it and how to start.

WHY SHOULD YOU CHOOSE SUSTAINABLE INVESTING?

The leaves of a flower unfurl as it grows

Less Uncertainty

One of the primary benefits of sustainable investing is the potential to lower risk.

The rising temperature of our planet is having an effect on the weather systems of the world and we are seeing the impact of this across our planet.  A company or investment product that takes this on board is simply being a responsible business or product.  To ignore this is a business and financial risk.  To take it on board as a factor is about mitigating this risk.

Positive Social Impact 

Sustainable investing also has the potential to make a positive social impact. It is an effective way to create social and environmental change. By investing in companies that adhere to social and environmental standards, you can directly support causes you care about.  Whether it’s investing in renewable energy projects or companies that promote gender equality, sustainable investments offer a way to make a difference in the world.

It is something you CAN do!

It is easy to feel overwhelmed by the scale of the problems facing our planet. Choosing to invest sustainably means you can make a difference with your money, probably more than you think.  According to Make My Money Matter, greening your pension is 21 times more effective at cutting carbon than stopping flying, going veggie and switching energy supplier combined.

A woman in a 1940's dress and surrounded by hat boxes, chooses the one she wants.DIFFERENT TYPES OF SUSTAINABLE INVESTING

There are 3 main ways of investing sustainably, which differ in terms of their financial goals and the difference they are aiming to make.

Responsible Investing 

This type of investing avoids destructive businesses which don’t look after people, planet or processes. In the early years of ‘ethical’ investing this would mean avoiding investing in companies based in South Africa during apartheid.  Now it is about screening out so called sin stocks.  These are shares in companies involved in activities that are considered unethical, such as alcohol, tobacco, gambling, adult entertainment or weapons.

Sustainable or ESG Investing 

This is a broad approach to investing where you include companies that are taking positive steps to challenge and address planetary problems.  These can range from companies focusing on renewable energy to those working towards a more equitable economic system. ESG refers to the environmental, social, and governance practices of an investment that may have an impact on it’s performance.  What is is their environmental footprint? How do they impact society? And how is the company governed?  The ‘ESG’ factors tell you if a company is morally worth investing in and also indicates how risky the company is from a financial perspective.

Impact Driven

Impact investing is a type of sustainable investing that aims to generate financial returns while also making a positive impact on society and the environment.  You are investing in possible solutions to create a more just and sustainable world. This could be fighting climate change, preserving natural resources or providing opportunities for under-represented populations.

These terms (and more!) can be used interchangeably and confusingly to describe sustainable investing.  This simple diagram shows the different types of sustainable investing in a clear and understandable way.

Two women in overalls, headscarves and big goggles solder together.

HOW TO GET STARTED

When it comes to sustainable investing, knowing where to start can be both intimidating and overwhelming.

The most important first step, however, is to be clear about your focus. If there is something you feel strongly about it makes it simpler to work out what you want to invest in, or what you want to avoid.  This focus will be different for everyone.

A client of mine, for example, lost her father to lung cancer due to smoking.  She was adamant she was was not investing in any companies related to tobacco production.  I have a friend who wants nothing to do with palm oil because of the deforestation that has occurred from the plantations.  For me what is important is avoiding companies involved in fossil fuel exploration and production.

Making investment choices based on what we feel strongly about may affect your returns.  Tobacco companies for example traditionally pay good dividends.  By avoiding any fossil fuel companies I have not benefitted from the $200 billion profit the top 5 oil companies made in 2022.  However, this is not personally the way I want to be making a financial gain. It is about my integrity as an investor.

When you are clear about your values you can then narrow your search for investments and choose an approach:

  • Do you want to exclude certain types of business altogether? (responsible investing)
  • Would you prefer to invest in problematic companies in order to improve them? (sustainable investing)
  • Or do you want your money invested in finding solutions? (impact investing)

It is important to still remember the simple principles of successful investing when investing sustainably. You always want to invest in a range of different things, rather than put all your money into the latest hottest company promising to solve the world’s problems.

SUSTAINABLE INVESTING FOR GOOD

An elegant young women, with the breeze in her hair, stands at the helm of a sailing ship. Looking happy and to a bright future of sustainable investing!

‘Put your money where you want the world to go. It is as simple and as powerful as that.’

Christiana Figueres  – Former Executive Secretary, United Nations Framework Convention on Climate Change

In the future the terms sustainable and traditional investing may no longer be used.  Financial decisions will hopefully consider the the long-term health of a company and it’s impact on the planet rather than only short-term financial gains.

The world is changing, and so are our investments. Sustainable investing is an important tool that can be used to create a better future for both our portfolios and the planet. 

While it’s not yet clear whether sustainable investing gives better financial returns or not, investing in this way is important for investors who want to lower their risk, make a positive social impact and invest in alignment with their values. 

In future blogs we will be looking at where to invest sustainably, greening your pension and choosing sustainable funds, so make sure you don’t miss them!

Or get going with sustainable investing yourself with an online Investing Taster Class, Girls Just Want to Have Green Funds for £35.

If you enjoyed this article, you might also enjoy The Gender Gap And How To Bridge it.

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 yearLater 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.