More than 70 percent of people with savings are not confident enough to take the plunge with investing, according to new evidence.
Only one in six people with savings of £ 5,000 or more considered investing in the stock market last year, despite nearly 60 percent having saved more since the pandemic began, according to online investment firm Wealthify.
Almost 40 percent of respondents said they don’t understand how investing works, and 22 percent find the language too confusing, the study shows.
Will you take the plunge Over 70% of people are not confident enough to take the plunge with investing, new evidence from Wealthify suggests
Although interest rates were at their lowest point and did not outperform inflation, more than 40 percent said they were satisfied with the returns on their cash savings.
Wealthify said, “This could mean millions of people are missing out on the opportunity to build their future wealth.”
The lack of confidence in investing was most evident among millennials and women. Both groups said “not understanding the process,” which made them feel this way.
“I’m worried about losing money if I start investing.”
Dawn Shaw’s mother helped shape her approach to money
Dawn Shaw, 61, lives in Leicester with her husband and has three children. She is now retired and her husband is the production manager.
She has been saving for about five years and they are planning to buy a bungalow.
Ms. Shaw told This is Money, “I feel like I don’t know enough about the risks and benefits of investing, and I fear that if I invest in something, I might lose money.
“If I had more information and I was sure that the benefits outweigh the risks, I would probably be investing. I am also a very conscientious person and would only invest in companies that are ethical in all areas of their business. ‘
Ms. Shaw’s background has also influenced her attitude towards money and saving.
“My mother, who worked incredibly hard her whole life to take care of me, firmly believed that you only buy what you can afford and save to buy things you want or need, that you cannot currently afford.
“Both I and my husband believe that saving money is a great benefit because we never know what the future will bring. This means that in the past we were unwilling to invest due to unknown risks and instead chose to use a savings account even though the interest rates are low. ‘
Regarding what Ms. Shaw would be more willing to try to invest, she said, “More transparency into the way stocks and shares work, and the risks that are explained without all of the technical jargon.
“It would have been very helpful if I had been taught this in school and I felt like having this knowledge throughout their childhood would help children understand the value of money and how investments work . “
Despite the increase in accessible financial education over the past few years, nearly 40 percent of savers surveyed said they didn’t know where to go to find out more about investing.
The feeling of exclusivity also remains an issue. 54 percent said they think investing is not for people like them. Three out of five respondents said they simply don’t know where to start when investing.
“I’m risk averse when it comes to money, so investing has never caught on.”
John McGill is risk averse when it comes to financial and investment matters
John McGill, 69, lives in Chelmsford, Essex. He saved money and started saving over 20 years ago.
When it comes to investing, McGill told This is Money, “I would invest if I had the knowledge and confidence in my ability not to lose my money. I am risk averse. ‘
Though he’s not directly immersed in stocks, he had a pension he used up and has since set up another pension to save up for his granddaughter.
Almost 70 percent of those surveyed said they had no long-term savings goals. More men than women said this was the case. But about half savers without long-term savings goals put money away for a “rainy day”.
Andy Russell, Managing Director of Wealthify, said: “The past year has been tough for everyone personally and financially for some. However, it is important that this does not have a lasting effect on our plans for the future. ‘
He added, “It is frustrating that the complicated nature of investing is often still explained and the perception of what an investor should look like prevents so many savers from considering their options.”
Knowing how to invest and what to invest in and being difficult and of course there is a real possibility that you will lose money that you invest. With this in mind, it can be worthwhile to seek financial advice on any investments before diving in.
“I was raised with an aversion to stocks when my grandmother lost money during the war.”
Christine Cain’s grandmother lost a lot of money in World War II
Christine Cain, 72, lives in South Wales and was a counselor before she retired.
She told This is Money, “When I was divorced a few years ago, I unfortunately had no income at all, so I had to rely on the pensions I had from previous jobs. This meant that I immediately had a reduced pension pot that has impacted me financially for the rest of my life.
“I don’t have the money to risk an investment because I understand that investments can go up as well as down.
“I was raised with an aversion to stocks as my grandmother lost a lot of money during World War II from investing a lot of money in the local shipyards.
‘That was always in the back of my mind, so I never invested in the stock market in any way.
“I very much doubt anything would encourage me to invest some of my remaining pension in the stock market as I can’t afford to lose it.”
The lower risk funds help to dip a toe in the stock market
One way to invest easily is to outsource everything to a so-called “robo-advisor”.
These online investment services typically ask around 10 to 15 questions in order to allocate an appropriate basket of assets to investors and manage them on behalf of the investors.
They are growing in popularity but still remain a niche market.
|Funds||Achievement 2020||Platform fee||Investment costs||total cost||Investment cost £ 10,000|
|Nutmeg – Fixed allocation 2/5||5.3%||0.45%||0.24%||0.69%||£ 69|
|Wealthify – Original for the time being||3.88%||0.6%||0.16%||0.76%||£ 76|
|Moneyfarm – Portfolio 3||3%||0.75%||0.29%||1.04%||£ 104|
|IG Smart Portfolio – Moderate||7.4%||0.5%||0.21%||0.71%||£ 71|
|Source: Boring Money|
Next are the options for investors who want to decide which funds to invest their money in.
In the case of low-cost index or tracker funds, these are not actively managed by a professional manager, but only set up in such a way that they follow a stock market index such as the FTSE 100 or another defined basket of investments.
Why don’t people feel confident about investing?
According to Wealthify, there are a few reasons many people are unsure whether to take the plunge when it comes to investing.
Here are the top reasons for their latest findings:
– I’ve always had traditional savings and I’m happy with their performance: 43%
– I don’t really understand the investment process: 38%
– The language of investing is too confusing: 22%
– I don’t know anyone who invests: 21%
– I don’t know where to go to find out more about investing: 21%
– I find it difficult to understand financial terms: 19%
– Lack of investment in school / growing up: 17%
As a result, they are usually very cheap to invest in and will likely turn out to be cheaper than portfolios created by robo-advisors.
Some trackers around the world invest in a mix of stocks and bonds with the option of making a lower risk selection.
The best-known provider is the investment management giant Vanguard.
Alternatively, diversification is one of the most important principles for investing.
It simply means not having all your eggs in one basket, be it in the same geographic area, on the same exchange, in the same asset class, in the same type of company, or anything else.
For example, with a lower risk portfolio, you might have about half the money in the stock markets, 40 percent in bonds or other fixed income assets, and possibly the remaining 10 percent in commercial real estate.
However, building such a portfolio can take a lot of work and research, and it can discourage some casual investors from simply looking for a place for their money that doesn’t pay 0.1 percent interest. You may want to hire an investment management firm to help you.
Finally, there are funds and trusts that are designed to prevent investors from losing money over a certain period of time and then achieve a positive return in the medium to long term.
These can be so-called “absolute return funds” or “defensively managed equity funds”, although listed mutual funds are also available that play a similar role.
“Nothing could make me invest in stocks or Bitcoin.”
Theo Loyla says he won’t invest in bitcoin or commodities
Theo Loyla, 71, lives in Birchington and is retired. However, he does line dance classes three times a week if the restrictions of Covid-19 allow.
Mr. Loyla has a cash ISA and savings accounts at a bank, as well as some premium bonds. He’s been saving all his life, usually just for one rainy day.
He told This is Money, “When I was working, I contributed to a company and two private pensions that I now like to receive in addition to my state pension.
‘I’ve never invested in stocks because I’m not comfortable with them. I don’t think anything would make me invest in stocks, bitcoin, or commodities. ‘
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