Five myths stopping you from your investing journey
MoneyNotes explores five of the more common myths stopping most people from taking that one step past savings to then start investing. It is important to note that Investing should be a long term game and by that we mean putting away money that is not urgently needed today or tomorrow or even in the next few years. let's step through these myths.
Myth 1 - Investing is only for those that have a lot of money
MoneyNotes says - Ok, this may have been the norm many years ago, but things have changed. These days you can get started with as little as £25 a month. In fact making regular contributions can actually help you weather market ups and downs. For example your £25 will buy more units when the price is lower and less units when the price is higher. Over the long term this smooths out the price of investing and your returns.
Myth 2 - Investing is pretty much gambling and you know what they say, "the house always wins"
MoneyNotes says – Yes there is a degree of uncertainty and risk involved in investing but the concept is far from gambling. Investing involves passing on your money to experts, who in turn give this money to companies to use your money to grow their businesses. As their businesses grow, these companies will pay you back, either with interest on the money you give them, or by offering you a direct share of the profits they make. Inevitably, some of these companies won't make a profit, so it's important to consider investing in multiple businesses through the financial expert.
Myth 3 - I need a financial adviser before I can invest
MoneyNotes says – A lot of people are put off by the prospect of getting independent financial advice especially when the fees for such advice could go into the thousands of pounds and you only want to invest a few hundred pounds!
In reality, you can do some research, get a free initial consultation and then start investing with a small amount. However, we must stress that if you are still unsure of the suitability of an investment you should seek advice. Once you're feeling confident and ready to go, do feel free to drop in on us and have a read through our educational materials to support your money journey!
Myth 4 - I have to pay a lot in fees to get these rocket scientists to invest my money
MoneyNotes says - First of all they are not rocket scientist, but most of them do have to work very hard to help your investments grow. Fees have continued to fall and are very competitive - for example you can pay as little as 0.2% every year for your money to be managed or up to 2%. This mean you could pay anything from £2 to £20 on £1,000 invested over one year.
Myth 5 - I am really militant with my regular savings so I really don't need to invest
MoneyNotes says - Ultimately the point of either saving or investing is to put money aside for future needs. Be it for emergency purposes or other projects. However the difference between savings and investment is quite stark. Of course both are important and it's always a good idea. Once you have saved for an emergency fund, then it only makes sense to target higher returns. You want your returns to be greater than inflation so that you at least maintain the real value of your money.
For example, if inflation is growing at 3% a year, your money is essentially also losing value at this same rate. (What was £300 in 2015, as a result of 3% inflation every year, would only be worth around £270 in 2018) This means that you need at least 3% interest to preserve the value (or what is known as purchasing power) of your money. With markets currently recording low interest rates, you will be hard pressed to find a savings account that will offer that sort of return, but the right investment will.