Money by Laura Whateley

Author:Laura Whateley [Laura Whateley]
Language: eng
Format: epub
Publisher: HarperCollins Publishers
Published: 2018-08-23T16:00:00+00:00

How to start investing

Start by thinking about why you are investing and what for – your investment and life ‘goals’ in financial adviserspeak. Your retirement? A house deposit? Your child’s future? Or simply to have a bit more money to live on when you reach midlife? This will help inform your decisions about how much risk you are willing to take with your savings and when you will need to withdraw your money or ‘cash in’ your investment.

The thing to remember is that you want to invest for as long as you possibly can. The longer you invest for, the more money you are likely to make. As I have mentioned above, you should not invest for less than five years any money you definitely want to get back. If you are willing to leave it for longer you can afford to invest in much more risky assets, too, like growth shares, which may produce a better return.

The fortunes of the stock market go up and down, plunging during the financial crisis, for example, when shares were worth much less than many people had paid for them. For investors this was alarming. They had, on screen, lost a huge amount of money. But for those who had been investing for years previously, and have left their money in since, it did not matter so much: the high points over decades make up for the low points, and those who remained invested in the market would have seen their money recover by now. That’s why the advice is so often, for the amateur investor, or even the very professional, to choose where you want to put your money and leave it there. If you have a nervous disposition, try not to look at it too often, because you might get cold feet, though do check it about once a year to see if you are on track to meet your goals, and to readjust if not. Do not panic if markets fall and respond by taking out all your investments just as their value hit its lowest point.

Trying to ‘time’ the market is often considered a mistake, because you end up investing when things look good and the market is riding high, subsequently shares are pricey, and then take your money out when everything is crashing, just as shares are at their cheapest. If a company is doing very well and everyone is excited about it, the chances are that rush has already been priced into its shares.

Warren Buffett, the world’s most successful stock-market investor, writes regular letters to shareholders in his company. In one he wrote:

During the extraordinary financial panic that occurred late in 2008, I never gave a thought to selling my farm or New York real estate, even though a severe recession was clearly brewing. And if I had owned 100 per cent of a solid business with good long-term prospects, it would have been foolish for me to even consider dumping it. So why would I have

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