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Saturday 21st September 2019

A beginner’s guide to investing – part one: should you get advice?

In an association with Open Money

By Hayley Millhouse

Head of Advisory Services, evestor

Let’s face it, investing can seem less than thrilling. There are far more exciting things to spend your money on, such as holidays or a nice new car.

But there comes a point when you’ve got to stop listening to your inner teenager and plan for the future. One of the most effective ways to do that is to invest your money. Setting aside just a small amount each month when you’re in your twenties or thirties can make a huge difference in later life.

Some people choose to put their money in a steady, run-of-the-mill savings account, which is fine if that’s what you prefer. But if you’re willing to take some risk in the hope of achieving want bigger returns, investing could be the way to go.

It can be risky than squirrelling away your cash in a low-interest savings account.

To demonstrate, let’s run through some numbers.

At the moment, the best easy access High Street savings account pays just 1.4%. That means if you’d put £10,000 into this an account like this 10 years ago, you’d have a paltry £11,501 today.

On the other hand, the FTSE All Share, an index covering 2,000 firms listed on the London Stock Exchange, has returned over 3% a year in dividend yields almost every year over the same period.

Before we go any further, it’s important to point out that investing in the stock market puts your capital at risk. This means it can be riskier than squirrelling away your cash in a savings account. If the stock market falls, you can lose money. That’s why we always suggest investing for the medium to longer term, so at least 5 years, to help smooth any fluctuations in the market.

So what next? Think about advice!

Picking investments can be daunting – there’s lots of confusing jargon and numbers to deal with. So many people opt to take advice.

The traditional route is to contact a financial adviser who will help you work out how much you can afford to invest and give you advice on which investments best match your goals.

A major benefit of taking advice is that you don’t have to worry about your investments as your adviser will manage them on your behalf.

Some financial advisers will not take on clients with small sums to invest.

A good adviser will meet with you at least once – and maybe even twice – a year to review your investments and to make any necessary changes to your portfolio.

However, they can be pricey. Advisers can charge an initial fee of anything from £75 to £350 an hour, or 0.5% to 5% of the value of the money being invested, they can then charge you up to 1% per year for ongoing advice.

It’s worth pointing out that some financial advisers will not take on clients with small sums to invest, meaning you’ll have to go elsewhere.

Thankfully, there are a number of cheaper options for people with smaller pots to invest.

One of these is what’s known as a robo-adviser, which is much less scary than it sounds.

The premise for most robo-advisers is simple: by completing a series of questions they are able to guide you on options for you, this however must not be mistaken for advice. Some robo-advisers do go further than this, here at evestor we offer financial advice, and if appropriate you can speak to a fully qualified financial advisor for free about your recommendation

The common ground that all robo-advice firms have is that they will all manage your investments, meaning you don’t have to worry about them.

They are also cheaper than traditional financial advisers, costing you from as little as 0.5% of your pot a year and with some firms you can open an account with as little as £1!

If none of these options grab you, you can always decide to go it alone and pick your own investments.

This involves having to open your own product such as an ISA and picking your own funds, something an adviser or robo-adviser would have done for you if you had opted to take advice.

But where do you start?

In part two, we’ll look at different types of investments and ways to access them.

Find out more about investing and saving with evestor.

Photo by rawpixel on Unsplash.

 

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Hayley Millhouse

Hayley Millhouse

Head of advisory services for Open Money, Hayley champions making advice affordable and accessible for everyone.

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