The most common misconceptions on investing I read and receive on my Personal Finance Instagram page.
Just 3% of Brits were subscribed to a stocks and shares ISA (in 2019). I wonder if the following myths prevent people from investing in the stock market… and let’s try to debunk these myths.
It is something only older people do
Do not wait until you are older to invest, if you are able to – start investing today! My greatest Personal Finance regret is not starting to taking investing seriously earlier.
Starting to invest as soon as possible will provide the greatest potential for your money to grow – thanks to the magic of compounding! Never wait for the “best” time to start investing as the best time to invest was yesterday, even starting with £10 will be a perfect first step in the right direction.
In the UK you need to be 18 to start investing in your own name, however check out Junior ISA’s that allow parents / guardians to start the investing journey for under 18’s.
Investing sounds risky
You can increase your confidence in your investments by ensuring that you research exactly where you put your money. Ensure that you know the finances of the company and any recent as well as historic information.
There are so many ways to research about investing now – such as reading books and looking through company / fund information using websites such as Fidelity, Yahoo Finance and Morningstar. Of course it will be high risk if you invest in speculative stocks that you read about on Twitter or via a friend… look at what happened with Gamestop.
Diversifying your portfolio is good way to reduce the risk related with your investments. Diversifying your portfolio means to spread investments out within different industries and countries which limits your exposure to one particular asset.
Moreover, keep an eye on the markets, read the Financial Times, watch CNBC – I have personally learnt an incredible amount of information from doing all three and I find it interesting to know what is happening in the world and how this is impacting global investments.
If risk is putting you off from investing, take a look at investing in funds instead of individual shares. A fund is a collection of individual investments and your money is spread out over a range of companies which also spreads your risk.
I do not have the time to invest
It has never been easier to open an investment account – check out my post on opening a Freetrade Investment account – it takes just a few minutes.
Yes, you will need to research each company / fund you invest in before making the purchase, however robo-advisor platforms such as Nutmeg and Moneybox do this for you. If you are invested in funds, it is the fund mangers responsibility to manage your money in order to get the best return.
Moreover, not checking your investment portfolio all the time could be of benefit – the market is volatile on a day to day basis and tracking your movements every day could lead to silly decisions.
I do not have enough money to invest
With investment platforms such as Freetrade and Trading 212 requiring only £2 or less to make an investment, it has never been easier than ever to invest with little amounts of money. Investing small sums of money every month or so will build up overtime.
Fractional shares are offered on some platforms that allow you to own part of a whole share that you can build up and increase your holding over time.
I will not be able to access the money
You will be able to access and withdrawal your investments whenever you would like. However, when it comes to investing it is often best to keep your money held for as long as possible in order to receive the best gains over time.
For me, I view my invested money as money I will only touch as a last point of call – my emergency fund and regular savers are available for me to access in case I require money that I have not budgeted for. That it is why an emergency fund is vital to have in place prior to investing – this is often 3 to 6 months of expenses that are saved in an easy access account.
How to overcome investing myths / fears
- Research – Read books. Educate yourself. Research the stocks / funds to ensure you have confidence of where you are putting your money.
- Focus on the long-term. Aim to keep your money invested for at least 5 years, if not longer. This will also help to reduce short term volatility.
- Keep up to date with what is happening on the global stock markets as well as the industries you invest in.
- Freetrade is one platform I use to invest with, they are easy to use and are fee-free. Check out my review of Freetrade here, and my link to sign up and receive a free share worth up to £200!
- Another platform I use is Nutmeg – whom are great for beginner investors as they provide full managed investment portfolios meaning you do not have to select any particular funds. They also have a great sign up offer, if you open your account using this link and deposit £500 you will not pay any management fees for the first 6 months of opening your account!