I’ve seen1 daffodils, blossom and flowers starting to make their way in the world this week. Spring is coming!
And it got me thinking about flora as a metaphor for investments.
Some Barclays2 research came out this week (I can’t find the original research, so we’re having to work with reported analysis). In it, we learn that:
Nearly two in five investors say deciding where to invest was one of the hardest decisions they’ve ever made
New investors will take three-and-a-half months to start after deciding to invest
Almost one in ten (8%) took more than a year to begin
44% of investors delayed putting money into shares, due to a lack of market knowledge
I know that investing is complicated and challenging to get started with. It took me at least eight times to go through the Nutmeg onboarding flow before I actually opened up my first investment product!
One really hard part about this is that you’re expected to make these decisions by yourself. Why is this challenging?
There’s the risk of losing your money — no one wants to lose money!
Navigating the world of investments is hard — especially when you don’t know what good looks like, what questions to ask, and what the process is going to look like
I like to think that talking to people about this — friends, family, strangers turned confidants encountered via safe spaces to talk about money 😉 — helps people along the journey.
My advice (not financial advice!) is to:
Spend time exploring a few different platforms
Always have a look at MoneySavingExpert for the platforms to be looking at
Talk to people — not just about the high-level concepts and “investment strategies” but also the nitty gritty; which platforms do they use? Which platforms have they tried in the past? How did they actually make their first investment?
1. What’s going on with cash ISAs?
A few weeks ago, lobbyists for the investment industry started to let everyone know that they think people are holding too much money in cash, and that the Government should nudge people into investing more.
Specifically that should:
Lower the cash allowance to £4,000
Or scrap cash ISAs
Or create a new tax-free product that encourages investment in the UK stock market.
Why is this?
Everyone’s obsessed with growth, and putting more money into investments leads to more growth
Holding money in cash doesn’t have this effect
There’s £294 billion held in cash ISAs currently; if this moves into investments, think of the growth! Supercharge the economy! Trickle-down economics!
On the other side, lobbyists for the savings industry have been pushing back on this idea:
They want to protect the cash ISA — and maintain the current £20k allowance
They benefit because “cash ISAs are a key source of funding for banks and building societies, which use the deposits to fund loans to households and businesses”
There’s nothing here about the impact on individuals; we know that people prefer to hold money in cash than investments because it provides a level of security. They don’t trust financial institutions. And they don’t trust investments.
The Chancellor has laid out her position:
“At the moment, there is a £20,000 limit on what you can put into either cash or equities, but we want to get that balance right.” She added that she wanted to create “more of a culture in the UK of retail investing like you have in the US, to earn better returns for savers”.
This means that it’s likely the amount you can put into cash ISAs will drop down in the future
I’m interested to see what she means by the US culture of retail investing;
In the US, individuals have to actively manage their own investments for retirement (through the 401k — unlike UK pension products, you have to pick your investments, whereas here, there are funds you can select)
They also don’t have free healthcare and a societal safety net, so there’s an essential requirement to provide for themselves and become entirely self-sufficient
I don’t think it’s a voluntary attitude
2. More UK money is in underperforming ‘dog’ funds
The latest BestInvest ‘Spot the Dog’ report is out. It identifies so-called ‘dog’ funds; those that are underperforming.
The big finding is that, over the past six months, the amount of UK investment money held in these funds has grown… by over a quarter.
If you have your money in a poor performer, review it!
Key findings:
ESG funds are performing less well than previously, and make up a quarter of the ‘dogs’
Why? “In part because of soaring energy prices but also owing to negative returns from alternative energy shares” — greener isn’t good, in terms of investments. Yet. Sadly.
Bigger doesn’t mean better:
The largest fund to have delivered the worst performance was St James’s Place Global Quality, which manages £9.4bn, and unperformed by 26% over three years
SJP’s Sustainable and Responsible equity fund, which runs £5.3bn, was the second worst, underperforming by 24%
3. Can you afford not to work?
If you’ve ever been to a financial adviser (or even a mortgage broker), you’ll know that they love to sell income protection and critical illness cover.
These are insurance policies that pay out in case you are unable to work. And they shouldn’t be overlooked.
Research of 2,000 UK adults found 56% couldn’t pick anything they would stop spending on if they could not earn their regular income through illness.
Other findings:
27% of those surveyed have had to take a month or longer off work, due to illness or injury
When pressed, the first things people would cut back on are: eating out, takeaways and subscriptions
Four in ten UK adults have less than £100 at their disposal at the end of each month
The guidance around such protection is to get this earlier rather than later. If you haven’t looked into it, why not do some research.
Here’s some info from the Citizen’s Advice Bureau.
And you can get quotes from comparison websites, to see how much this might cost you.
Links!
Money
10,000 miles on your new car? That’s 22% of value gone. And after 20,000 it starts dropping by 17-18% every 10,000 miles.
On being ordered back to the office more. “We’re seeing an alarming rise in regression not progression across many industries.” Studies show that productivity levels are the same for hybrid workers as full-time in-office employees.
‘The tyranny of apps’: those without smartphones are unfairly penalised, say campaigners.
How to resolve wealth inequality before it destroys us all. The Long Memo (TLM)
Life
People watch a collective 1B+ hours of YouTube content on their TVs.
Want to stay sane? Try switching off your news alerts. I endorse this so hard.
“Easy ways I elevated my life.”
The loneliness of self-improving.
Money Brunch yesterday was FUN! Come to the next one? It’s on 29 March.
Know someone who would enjoy this in their inbox on a Sunday morning?
And felt — my hay fever is already here. Yay :/
It should be noted that Barclays is lobbying on the investment industry’s side, for changes to make it easier for consumers invest (see the first story of the week)