Certain images may spring to mind when someone mentions an ‘investor’. It’s easy to visualise a well-heeled individual in a sharp suit clutching a copy of their financial newspaper.
The truth, of course, is very different. Most investors are like you and me, people who have a pension or a stocks-and shares ISA. And there are record numbers of us “investors” today; with more than 20 million people in workplace pensions 1 and 20 million 2 holding ISAs — including cash and stocks and shares ISAs.
The activity of all us investors adds up to a lot of money. In stocks and shares ISAs alone, latest figures indicate that more than £300bn of our money has been invested . That’s an average of more than £60,000 per person . Add in pensions, and the amount rises to over £1 trillion. That’s more than £1,000,000,000,000.
If we simply stuck our hard-earned money under a mattress it would reduce in value each year as shop prices rose with inflation. For example, according to the Bank of England 3, if we had stuck £1,000 under our mattress back in the year 2000, it would now only be able to buy the equivalent of nearer £500 of goods or services. Inflation would have slowly eaten away nearly half the value of our sleeping money in the intervening twenty-one years.
By investing, we create the potential to make our money work harder, hopefully allowing it to grow in value each year, or at least not losing value to inflation.
That all sounds great, but how, where and when should we invest? Should we invest in equities, funds, bonds, gilts, unit trusts, commodities, OEICs, UCITs, ESGs, or somewhere else? And what even are these things?
If you’re feeling unsure, don’t worry. You’re not alone. According to the Financial Conduct Authority, fewer than one-in-three (32%) of us believe we have a high level of knowledge about financial matters 4. Nearly one-in-two (44%) of us feel overwhelmed 5.
But that does not mean we are alone and helpless.
As in many walks of life, the best way to act can be to seek the help of an expert. For our health, we can seek the help of a doctor. For our car, we can seek the help of a mechanic. And for investing, we can seek the help of a financial adviser.
A qualified financial adviser is an expert in managing money and planning our finances. This can include investing. They will have the understanding to navigate the complex language; they will have the qualifications, based on recognised industry exams and standards; and they will have the legal liability to protect you should something go avoidably wrong.
For this understanding, qualifications and liability we will pay a fee. But, if it results in us not losing half the value of our money, as shown in the example above, it could be a fee very well paid.
However, it is worth noting, the value of investments can go down as well as up, and you may get back less than invested.
How much it costs will depend upon how much money you are wanting to invest, and the type of advice you are seeking. You may not even know the answers to these questions. But again, don’t worry. Most good advisers will give you a free introductory consultation to explain their expertise, services and charges. You should then be free to decide if, how and when to proceed.
If you think that financial advice is only for those with lots to invest, you’d be wrong. It is estimated that more than four million adults take financial advice each year 6. And that is not four million millionaires! A good financial adviser should be open to considering all levels of investing, and will recommend if paying for their services is worth your while. Using the car mechanic analogy, sometimes it will be worth paying for expertise, but on other occasions, when changing a light bulb for example, it would probably be easier and cheaper to do it yourself. If you’re unsure, just ask.
If you don’t have a financial adviser, speak to your product provider and they should be able to help point you in the right direction.
And remember, a problem shared — financial or otherwise — can be a problem halved.