Learning Zone

1 00:00:03.960 --> 00:00:07.400Welcome to "Are You Investing Comfortably?" in partnership with Alliance Witan. 200:00:07.680 --> 00:00:11.420I'm Georgie Frost, and I've been a financial broadcaster for over a decade. 300:00:11.790 --> 00:00:15.700And if there's one thing I've learned, it's that investing often sounds far more 400:00:15.760 --> 00:00:19.020complicated and intimidating than it actually needs to be. 500:00:19.240 --> 00:00:21.020Investing isn't about being clever. 600:00:21.240 --> 00:00:23.340You don't need to be an expert to do it well. 700:00:23.400 --> 00:00:26.890It's about being consistent, and it's about understanding the basics, 800:00:27.280 --> 00:00:30.200thinking long term, and putting a steady plan into place. 900:00:30.680 --> 00:00:33.160In this first episode, we're going back to basics. 1000:00:33.440 --> 00:00:36.040What is investing really? Why does it matter? 1100:00:36.470 --> 00:00:39.540And how can you start without feeling overwhelmed by choice? 1200:00:40.020 --> 00:00:43.500Well, joining me to guide us through is award-winning investment journalist, Cherry 1300:00:43.580 --> 00:00:47.160Reynard. Cherry, welcome. Thank you so much for joining us. 1400:00:47.240 --> 00:00:47.940Nice to be here. 1500:00:49.000 --> 00:00:51.800Cherry, what actually is investing? 1600:00:52.740 --> 00:00:52.900Well, 1700:00:54.340 --> 00:00:57.800it feels like a big question, but actually it's quite straightforward. 1800:00:58.400 --> 00:01:01.480I think everyone's quite familiar with the concept of saving. 1900:01:01.600 --> 00:01:05.181So you put your money in a bank account, you get 3 or 4% 2000:01:05.240 --> 00:01:09.160interest, and all being well, you get your money back at the end. Great. 2100:01:09.640 --> 00:01:10.000But 2200:01:10.820 --> 00:01:12.860really, if you're investing for a 2300:01:13.740 --> 00:01:17.020house or a car or retirement or any other kind 2400:01:17.060 --> 00:01:20.860of expensive thing, it's going to take you an awfully 2500:01:20.940 --> 00:01:24.160long time to get there by doing that. 2600:01:25.780 --> 00:01:29.040So with investing, it's about putting 2700:01:29.080 --> 00:01:31.940money to work with the hope of 2800:01:32.760 --> 00:01:36.700achieving a higher return. So it might be putting money to 2900:01:36.740 --> 00:01:40.220work in the stock market, or in 3000:01:40.260 --> 00:01:44.080bonds, or in property. And your capital may 3100:01:44.180 --> 00:01:47.490be at risk, but the hope is that that will have a payoff further 3200:01:48.000 --> 00:01:48.720down the line. 3300:01:49.760 --> 00:01:50.920You spoke there about 3400:01:51.960 --> 00:01:55.820if you're trying to save for something long term, maybe that's a retirement. 3500:01:56.680 --> 00:01:59.420When we're talking long term, what do we actually mean here? 3600:01:59.600 --> 00:02:03.040What sort of should your time horizon be ideally? 3700:02:03.720 --> 00:02:07.230The idea, I think, is that stock markets can be very volatile 3800:02:07.270 --> 00:02:07.480Mm-hmm. 3900:02:07.560 --> 00:02:08.400... in the short term. 4000:02:09.980 --> 00:02:13.920But over the long term, they tend to deliver 4100:02:13.980 --> 00:02:15.400a higher return than 4200:02:17.140 --> 00:02:17.460cash. 4300:02:19.520 --> 00:02:19.840So 4400:02:20.960 --> 00:02:21.560usually, 4500:02:22.840 --> 00:02:26.700advisors would look at maybe five years, I would 4600:02:26.760 --> 00:02:30.740say as a reasonably comfortable time where you could 4700:02:30.780 --> 00:02:34.549ride out major volatility in stock 4800:02:34.620 --> 00:02:38.540markets. What you're really trying to avoid is needing your 4900:02:38.620 --> 00:02:39.940money at a 5200:02:42.420 --> 00:02:46.370moment when the markets are having a wobble, and then you have to take it out and 5300:02:46.420 --> 00:02:49.940realise a loss. Whereas if you've just got time, 5400:02:50.460 --> 00:02:53.500you can just wait until they hopefully 5500:02:53.520 --> 00:02:54.540recover. 5600:02:54.600 --> 00:02:57.329You mentioned earlier different types of investments out there. 5700:02:57.400 --> 00:02:59.580I think we're quite familiar with property. 5800:02:59.900 --> 00:03:03.260But just explain to us in more detail, stocks and bonds. 5900:03:03.500 --> 00:03:04.340Stocks first. 6000:03:05.000 --> 00:03:07.160Okay. So stocks, 6100:03:08.140 --> 00:03:11.300stock markets or shares or equities, 6200:03:12.200 --> 00:03:14.140to use the jargon. 6400:03:15.650 --> 00:03:17.580Which in itself is quite confusing, isn't it? 6500:03:17.710 --> 00:03:17.710Yes. 6600:03:17.740 --> 00:03:18.880It's the same thing, isn't it? 6700:03:19.140 --> 00:03:19.420Yes. 6800:03:19.540 --> 00:03:20.340Stocks, shares, equities. 6900:03:20.660 --> 00:03:22.100Yes. All exactly the same thing. 7000:03:25.120 --> 00:03:28.500And actually calling them shares is probably the 7100:03:29.040 --> 00:03:30.960best option because that's really what they are. 7200:03:31.020 --> 00:03:31.030Mm-hmm. 7300:03:31.040 --> 00:03:32.380They are a share 7400:03:33.240 --> 00:03:34.959in a company. 7500:03:35.080 --> 00:03:35.320Mm-hmm. 7600:03:35.500 --> 00:03:36.500So, 7700:03:37.940 --> 00:03:39.540investors pay 7800:03:40.400 --> 00:03:42.180their sum, and they get a little 7900:03:43.180 --> 00:03:46.3601/10,000 or whatever of a company. 8000:03:47.940 --> 00:03:51.920And for that share, they are entitled to 8100:03:52.740 --> 00:03:54.080some of the profits of that company, 8200:03:55.220 --> 00:03:58.160which may be paid out as dividends. 8300:03:58.860 --> 00:04:02.680And then they are also actually, which 8400:04:02.880 --> 00:04:06.580people talk about less, but they also have a little stake in the running of that 8500:04:06.640 --> 00:04:10.580company. So, if they want to go to an AGM 8600:04:10.760 --> 00:04:11.480and make a fuss 8800:04:11.950 --> 00:04:15.940then they can do that. The hope is that they 8900:04:15.960 --> 00:04:19.740will invest in a good company, and the share price will 9000:04:19.800 --> 00:04:23.360grow over time, and then they can sell those shares for more than 9100:04:24.160 --> 00:04:24.920they bought them for. 9200:04:26.020 --> 00:04:29.020So I guess that's the principle with shares. 9300:04:30.780 --> 00:04:34.720Bonds are a slightly different beast. It sort of operates like a loan. 9400:04:34.820 --> 00:04:35.000Mm-hmm. 9500:04:35.120 --> 00:04:38.960So a company will issue bonds to 9600:04:41.360 --> 00:04:45.280either finance its operations or for large 9700:04:45.300 --> 00:04:49.130investment projects, and investors will buy 9800:04:49.180 --> 00:04:52.000those bonds, and what they receive is 9900:04:52.160 --> 00:04:56.039an interest payment over time. So if 10000:04:56.100 --> 00:04:59.600they're a 10-year bond, they'll receive a set interest payment over time, 10100:05:00.040 --> 00:05:02.820and then they get their money back at the end, all being well. 10200:05:03.760 --> 00:05:07.380And bonds can be issued by governments, so UK 10300:05:07.440 --> 00:05:08.620government, US government, 10400:05:10.360 --> 00:05:12.720and they can also be issued by companies. 10500:05:13.820 --> 00:05:17.160And the interest rate that people pay is 10600:05:17.460 --> 00:05:18.440set by 10700:05:19.380 --> 00:05:21.620how risky people perceive 10800:05:22.600 --> 00:05:25.480that entity to be. So, 10900:05:27.220 --> 00:05:31.080if a company's got a lot of debt, if its profits are 11000:05:31.120 --> 00:05:34.720falling, you'll get a higher rate of interest for lending to that 11100:05:34.780 --> 00:05:38.340company. If it's a high-quality blue chip, 11200:05:38.780 --> 00:05:42.370it'll be lower. So that's bonds in a nutshell. 11300:05:42.840 --> 00:05:46.340Just listening to you talking there, and when we were trying to define stocks, 11400:05:46.420 --> 00:05:50.060shares, equities being the same, also the interest payment on a bond is called a 11500:05:50.200 --> 00:05:50.980coupon. 11600:05:51.200 --> 00:05:51.730Oh, yes. Yes. 11700:05:51.740 --> 00:05:55.680The language in investing is sometimes quite confusing, and we've done 11800:05:55.740 --> 00:05:58.140lots of work at this at Alliance Witan on the Learning Zone. 11900:05:58.180 --> 00:06:01.912So do go and see that. But it is not 12000:06:01.932 --> 00:06:04.492helpful, is it? The language of investing. 12100:06:04.952 --> 00:06:06.152No. Sometimes I think 12200:06:07.292 --> 00:06:10.572parts of the industry have a vested interest in making it 12300:06:10.872 --> 00:06:11.632complex. 12400:06:11.652 --> 00:06:11.802Mm-hmm. 12500:06:12.792 --> 00:06:16.702When actually, the basic sort of building blocks of investing are really 12600:06:16.852 --> 00:06:19.372quite straightforward. And 12700:06:20.312 --> 00:06:21.012I think 12800:06:21.832 --> 00:06:25.292for people looking at starting out in investing, 12900:06:26.312 --> 00:06:27.492it's quite difficult to 13000:06:28.712 --> 00:06:30.772sort of ignore all that complexity. 13100:06:30.822 --> 00:06:30.822Yeah. 13200:06:31.072 --> 00:06:34.452But you can, and you should because 13300:06:35.612 --> 00:06:36.332there are really 13400:06:37.392 --> 00:06:38.792straightforward ways 13500:06:39.692 --> 00:06:40.512to invest. 13600:06:41.932 --> 00:06:43.632You could really just get 13700:06:44.552 --> 00:06:48.081a nice collective fund where a fund manager is 13800:06:48.132 --> 00:06:50.512doing the hard work for you, 13900:06:51.372 --> 00:06:53.672and you wouldn't have to think about it. 14000:06:53.732 --> 00:06:57.592You don't need to get involved in the oil price is going up 14100:06:57.652 --> 00:07:01.392or the economy's tanking or any of that 14200:07:01.452 --> 00:07:03.452kind of thought. 14300:07:03.652 --> 00:07:07.432I think of it like driving a car. I have absolutely no idea how a 14400:07:07.512 --> 00:07:08.292car works. 14600:07:08.702 --> 00:07:12.352A bit like using my mobile phone. But if I want to, I can get 14700:07:12.512 --> 00:07:14.532very deep in learning how a car works. 14800:07:14.552 --> 00:07:16.562But I'm quite happy just driving my car, and it- 14900:07:16.592 --> 00:07:16.812Yeah 15000:07:16.822 --> 00:07:19.072... you can take both views if you like. 15100:07:19.112 --> 00:07:22.892You can start just driving the car, and then you can get much more involved if you 15200:07:22.932 --> 00:07:24.912want. But the key, I think, is just to get started. 15300:07:25.272 --> 00:07:27.652But for anyone who's still sort of on the fence thinking, 15400:07:28.672 --> 00:07:32.622"If I can't get a decent rate on my savings accounts, why would I take the risk and 15500:07:32.652 --> 00:07:33.172invest?" 15600:07:33.892 --> 00:07:36.632I'd highlight two elements. The first is 15700:07:37.652 --> 00:07:38.072growth. 15800:07:39.352 --> 00:07:43.252Stock markets over time have historically delivered higher 15900:07:43.552 --> 00:07:47.312growth than cash savings, and that 16000:07:47.832 --> 00:07:48.932can be really important. 16100:07:49.632 --> 00:07:49.682Mm-hmm. 16200:07:49.732 --> 00:07:52.952That can really make a difference to your long-term 16300:07:53.692 --> 00:07:54.132wealth. 16400:07:55.232 --> 00:07:58.872The effects of compounding over time are profound. 16500:07:58.932 --> 00:07:59.212Mm-hmm. 16600:08:01.132 --> 00:08:01.392So 16700:08:02.412 --> 00:08:03.212growth would be one. 16800:08:04.432 --> 00:08:05.852I guess the other one is inflation. 16900:08:06.252 --> 00:08:07.092If you 17000:08:08.052 --> 00:08:11.032have a savings account, you've got 17100:08:12.612 --> 00:08:14.6923 to 4% UK inflation. 17200:08:14.702 --> 00:08:15.352If you're lucky, as well. 17300:08:15.392 --> 00:08:15.992If you're lucky. 17400:08:16.052 --> 00:08:16.192Yeah. 17500:08:16.292 --> 00:08:20.032Yes. UK inflation is currently running at 17600:08:20.252 --> 00:08:20.6623%. 17700:08:20.672 --> 00:08:20.852Mm-hmm. 17800:08:20.972 --> 00:08:22.272So you're 17900:08:23.352 --> 00:08:25.532getting 1% in real terms. 18000:08:25.552 --> 00:08:25.682Mm-hmm. 18100:08:27.192 --> 00:08:29.852And there have been times when actually you're 18200:08:29.872 --> 00:08:33.192getting less than inflation. 18300:08:33.232 --> 00:08:33.572Yeah. 18400:08:33.653 --> 00:08:37.312Actually, until quite recently, when interest rates were very low, that 18500:08:37.612 --> 00:08:40.692was quite a persistent problem. So that means your 18600:08:41.632 --> 00:08:44.442savings are losing money in real terms all the time. 18700:08:45.232 --> 00:08:48.542Well, that's bad. So by investing 18800:08:48.692 --> 00:08:51.152in companies and shares, 18900:08:51.992 --> 00:08:55.532if you think about a company, when it's faced with an inflationary 19000:08:56.032 --> 00:08:58.092environment, it can 19100:08:59.352 --> 00:09:00.412put its prices up. 19200:09:01.552 --> 00:09:04.692So actually, it should be able to sort of sustain its 19300:09:04.732 --> 00:09:08.032profitability, and that's reflected in share prices. 19400:09:08.092 --> 00:09:11.912So historically, the stock market has offered some 19500:09:11.932 --> 00:09:15.352protection against inflation. That might not matter over a year or two. 19600:09:15.442 --> 00:09:15.462Mm-hmm. 19700:09:15.462 --> 00:09:18.872But if you're saving for the long term, if you're saving for 20 years, 19800:09:19.112 --> 00:09:20.852that's really, really important. 19900:09:21.292 --> 00:09:25.152Inflation can be incredibly corrosive on your returns. 20000:09:25.492 --> 00:09:29.392You mentioned a word in that that we hear a lot in investing. 20100:09:29.532 --> 00:09:31.572It's compound and compounding. 20200:09:32.852 --> 00:09:35.232Einstein was credited as calling it the eighth wonder of the world. 20300:09:35.292 --> 00:09:39.112Whether he said that or not, I'm not sure, but I do love the phrase, "He who 20400:09:39.192 --> 00:09:42.912understands it, earns it. He who doesn't, pays 20500:09:42.992 --> 00:09:45.732it." Just explain to us exactly what compounding is. 20600:09:46.052 --> 00:09:46.252Well, 20700:09:47.552 --> 00:09:51.232we're going back to sort of high school 20800:09:51.292 --> 00:09:53.132maths. Let me illustrate it with 20900:09:54.372 --> 00:09:57.152numbers. So year one, you have £10,000. 21000:09:57.692 --> 00:10:01.652If that grows at 5%, by the end of year 21100:10:01.692 --> 00:10:03.452one, you have £10,500. 21200:10:03.512 --> 00:10:03.572Mm. 21300:10:03.612 --> 00:10:06.812Great. But then the next year, assuming you get 21400:10:07.692 --> 00:10:11.3325% again, it's paid on the £10,500 sum, 21500:10:11.992 --> 00:10:15.052and that really sort of snowballs over time, 21600:10:15.772 --> 00:10:16.212and 21700:10:17.032 --> 00:10:19.852I'd agree with Einstein, it's kind of like magic. 21800:10:20.211 --> 00:10:22.432It's an illustration of how much 21900:10:23.292 --> 00:10:27.212this can matter over time. So if you had £10,000 22000:10:27.252 --> 00:10:30.932invested at 1% over 20 years, 22100:10:32.072 --> 00:10:35.312at the end of it, you'd have about £12,000. 22200:10:36.732 --> 00:10:39.892If it was 5%, it would be about 22300:10:39.902 --> 00:10:43.792£27,000, so it can really make a difference 22400:10:43.832 --> 00:10:44.392over time. 22500:10:44.772 --> 00:10:46.892That snowball analogy I think is a fantastic one. 22600:10:47.312 --> 00:10:47.412Mm. 22700:10:47.532 --> 00:10:50.412One thing that we think about a lot when a snowball, is it does get bigger as it 22800:10:50.452 --> 00:10:51.152goes down the hill. 22900:10:51.402 --> 00:10:51.402Mm. 23000:10:51.412 --> 00:10:53.252But it also gets faster. 23100:10:53.632 --> 00:10:54.292Mm. 23200:10:54.332 --> 00:10:57.812And that's the thing we miss, and once you start, over a couple of years, and then 23300:10:58.092 --> 00:11:01.9325 years, and then 10 years, you really start to notice that effect, don't you? 23400:11:02.472 --> 00:11:06.032Yeah, and I think actually that it can work so well 23500:11:06.312 --> 00:11:06.552if 23600:11:08.332 --> 00:11:09.312you start young. 23700:11:10.132 --> 00:11:10.212Mm-hmm. 23800:11:10.392 --> 00:11:14.372You can do so much of it. I think part of the problem is that 23900:11:14.432 --> 00:11:18.372people think of investing as something that they'll do a little bit later, 24000:11:18.432 --> 00:11:18.922you know, when they're- 24100:11:18.992 --> 00:11:19.872When I've got some money. 24200:11:19.992 --> 00:11:21.532When I've got some money, when I'm a bit older. 24300:11:22.012 --> 00:11:25.412But actually, if you could do it in your 24400:11:25.612 --> 00:11:26.31220s, 24500:11:27.192 --> 00:11:31.132that snowball effect is so incredible really, because your money's growing 24600:11:31.212 --> 00:11:34.992for like 30, 40 years, and you can really save yourself a whole 24700:11:35.052 --> 00:11:38.772load of headaches in your 50s if you start really young. 24800:11:39.142 --> 00:11:42.982But I also think it's a really important message because a lot of people 24900:11:43.032 --> 00:11:46.212listening or watching this will be older than 20. 25000:11:46.252 --> 00:11:47.532It's something we hear a lot, don't we? 25100:11:47.612 --> 00:11:51.402Oh, start in your 20s, and you think, "Yeah, I wish." 25200:11:51.402 --> 00:11:53.412Yeah. I've got student loans, I've got rent. Yeah. 25300:11:53.472 --> 00:11:55.712Well, or I'm 40, or I'm 50. 25400:11:55.762 --> 00:11:55.762Yeah. 25500:11:55.772 --> 00:11:58.072But actually, we're working longer, we're living longer. 25600:11:58.172 --> 00:12:01.392You could, if you start at 50, easily have 20 years if you wanted to, or 25700:12:01.552 --> 00:12:02.19240. 25800:12:02.222 --> 00:12:02.222Yeah. 25900:12:02.252 --> 00:12:05.43220 years. So I think it's a really important message to say, actually, it's not too 26000:12:05.452 --> 00:12:08.092late if you haven't started in your 20s. 26100:12:08.412 --> 00:12:10.032Yeah. It's always working for you. 26200:12:10.212 --> 00:12:10.452Yeah. 26300:12:10.602 --> 00:12:11.072Yes. So, yeah. 26400:12:11.492 --> 00:12:14.862Talking about myths, I hear a lot as a financial broadcaster, I'm sure you do as 26500:12:14.892 --> 00:12:18.552an investment journalist, but one of the main myths is 26600:12:18.952 --> 00:12:22.426investing just isn't for people like me who said they're, 26700:12:22.466 --> 00:12:26.036"I'm not the right age," or, "I don't have the right money," or, "I don't look the 26800:12:26.076 --> 00:12:26.856right way." 26900:12:26.896 --> 00:12:27.466Yeah. 27000:12:27.476 --> 00:12:30.236It's not true, though, is it? Investing can be for everyone. 27100:12:30.596 --> 00:12:34.196Yeah, and I would say actually that you're probably invested 27200:12:34.276 --> 00:12:37.986already without realising it. So if you have 27300:12:38.316 --> 00:12:42.236a workplace pension, for example, that will be invested 27400:12:43.276 --> 00:12:47.116partly or wholly in the stock market. So you're there already. 27500:12:48.596 --> 00:12:49.646Mm. 27600:12:49.676 --> 00:12:49.996But 27700:12:50.916 --> 00:12:54.176really, it is for everyone. You can invest with as little as 27800:12:54.576 --> 00:12:55.316£5. 27900:12:56.916 --> 00:12:57.376And 28000:12:58.196 --> 00:13:02.136even if you're putting £5, £25, £50, it will make a 28100:13:02.156 --> 00:13:05.756difference over time. It will give you a nest egg. 28200:13:05.896 --> 00:13:09.876If you can make that compounding work for you, it's a great thing over the 28300:13:09.916 --> 00:13:10.426long term. 28400:13:10.626 --> 00:13:12.856It's like I alluded to at the start, consistency is key. 28500:13:13.086 --> 00:13:13.086Mm. 28600:13:13.096 --> 00:13:16.676Getting into a habit of putting money in. 28700:13:16.776 --> 00:13:20.376Another thing I alluded to at the start was this idea that you 28800:13:20.416 --> 00:13:23.956don't have to be some mathematical genius or 28900:13:24.136 --> 00:13:25.776financial whiz- 29000:13:26.456 --> 00:13:26.66No 29100:13:26.716 --> 00:13:27.496... to do investing. 29200:13:27.756 --> 00:13:31.556No. I have an English degree. I am not a 29300:13:31.616 --> 00:13:33.116financial whiz. 29400:13:35.116 --> 00:13:37.096And you definitely don't need to be. 29500:13:37.196 --> 00:13:41.076You can hand 29600:13:42.096 --> 00:13:42.396the 29700:13:43.616 --> 00:13:45.975hard decisions about where to invest 29900:13:47.616 --> 00:13:49.276to an expert. So you can 30000:13:50.636 --> 00:13:50.976say, 30100:13:52.156 --> 00:13:53.816"Roughly, 30200:13:54.796 --> 00:13:55.996this is the kind of risk 30300:13:57.256 --> 00:14:01.176parameters that I would like. These are the risk tolerances I have." And 30400:14:01.676 --> 00:14:04.896they will do all the hard work for you. They'll do all the thinking for you. 30500:14:04.936 --> 00:14:08.866And you really can just put £50, 30600:14:09.596 --> 00:14:11.476£100 aside every month 30700:14:12.636 --> 00:14:16.476into a globally diversified 30800:14:16.976 --> 00:14:20.776investment fund, very easy to do, and you 30900:14:20.816 --> 00:14:22.016don't have to think about it. 31000:14:22.896 --> 00:14:26.156If you get that core right, 31100:14:27.136 --> 00:14:30.495then you can go and experiment with your 31200:14:31.516 --> 00:14:35.016space, travel, ETF- ... or whatever you 31300:14:35.036 --> 00:14:37.016fancy when you've got comfortable with it. 31400:14:37.176 --> 00:14:40.136But in the meantime, it will be 31500:14:41.256 --> 00:14:44.636very effective just doing £50, £100 a month in 31600:14:44.656 --> 00:14:45.656a simple, 31700:14:46.556 --> 00:14:47.696straightforward collective fund. 31800:14:48.656 --> 00:14:52.576So for anyone who wants to get started investing, what tips would you have for 31900:14:52.616 --> 00:14:52.736them? 32000:14:53.456 --> 00:14:55.116Definitely don't overcomplicate it. 32100:14:55.476 --> 00:14:56.636When I first started out, I 32200:14:57.956 --> 00:15:01.816really thought I was going to find the next Amazon and invested 32300:15:01.856 --> 00:15:05.596in a lot of very silly stuff, when really I should have just put 32400:15:05.636 --> 00:15:09.456money in a, as I said, in a nice collective investment 32500:15:09.536 --> 00:15:09.756fund. 32600:15:10.956 --> 00:15:13.356So I think what I'd say is 32700:15:14.396 --> 00:15:17.956use one of the...there's a lot of platforms to choose 32800:15:17.996 --> 00:15:18.716from. 32900:15:18.776 --> 00:15:18.785Mm. 33000:15:18.785 --> 00:15:22.366Mostly the reputable platforms that you will have heard of, 33100:15:22.696 --> 00:15:26.136they're all good. Their technology is good. 33200:15:26.486 --> 00:15:30.096They will all have pathways on them to help you 33300:15:30.836 --> 00:15:34.816choose the right investment, to help guide you based on your risk 33400:15:34.876 --> 00:15:38.606and your aspirations for your money. 33500:15:39.516 --> 00:15:41.416So go on those. I would also say 33600:15:42.616 --> 00:15:46.516it's worth investing in an ISA wrapper. 33700:15:46.546 --> 00:15:46.596Mm. 33800:15:48.056 --> 00:15:51.656Because while over one or two years, 33900:15:51.776 --> 00:15:55.496the fact that you're paying tax on your 34000:15:55.536 --> 00:15:59.276investments won't matter that much, but over the long term, that really 34100:16:00.296 --> 00:16:01.516can make a difference. And 34300:16:02.816 --> 00:16:06.796the tax situation can really interfere with that 34400:16:06.856 --> 00:16:09.716compounding thing. So ISA wrapper's 34500:16:10.696 --> 00:16:12.856good. And then just 34600:16:13.696 --> 00:16:15.116keep paying your direct debit. 34700:16:15.316 --> 00:16:15.456Mm. 34800:16:15.496 --> 00:16:18.896I remember advisors always saying, make sure it comes out the moment your salary 34900:16:18.936 --> 00:16:20.996goes in so you never miss it. 35000:16:23.496 --> 00:16:27.376Perhaps ratchet it up a little bit every time you get a pay rise, and forget 35100:16:27.416 --> 00:16:27.776about it. 35200:16:29.476 --> 00:16:33.296All great tips. I think if I was to offer my own, I 35300:16:33.356 --> 00:16:36.156would say the first one is the most simple one. 35400:16:36.266 --> 00:16:40.176I think too many of us let perfect be the 35500:16:40.216 --> 00:16:41.116enemy of good, 35600:16:42.176 --> 00:16:45.456and I think just get started. 35700:16:45.936 --> 00:16:45.946Yeah. 35800:16:45.956 --> 00:16:49.116Choose a reputable platform. Just get started. 35900:16:49.776 --> 00:16:52.996It's like driving that car. You are not going to be perfect at the start. 36000:16:53.616 --> 00:16:57.576And then you can start to learn and do read about it, listen 36100:16:57.636 --> 00:16:59.826to podcasts, get involved, and you'll get more 36200:17:00.996 --> 00:17:04.696interested with your investing, or not, as you choose. 36300:17:05.896 --> 00:17:09.636To that, I would also add, we're seeing many, many more people go online, 36400:17:09.696 --> 00:17:13.296particularly social media, to get their investing news and 36500:17:13.477 --> 00:17:15.796tips. There are some phenomenal 36600:17:16.696 --> 00:17:20.576people, companies, that are giving great information 36700:17:20.616 --> 00:17:24.426on social media, but there are also a lot of bad actors, and there's also a lot 36800:17:24.456 --> 00:17:25.796of noise. 36900:17:25.966 --> 00:17:25.966Mm. 37000:17:25.966 --> 00:17:27.977So much noise. Everybody telling you what to do. 37100:17:28.796 --> 00:17:32.726Try to tune out the noise. And also with that, I would say 37200:17:34.416 --> 00:17:38.106markets go up and down, particularly in the world it feels we're living in at the 37300:17:38.196 --> 00:17:38.716moment. 37400:17:40.136 --> 00:17:43.775Try, if you can, not to obsess over your investments. 37500:17:43.816 --> 00:17:46.916It can be very tempting, especially if you've got a mobile app and you can see- 37600:17:47.036 --> 00:17:47.046Yeah 37700:17:47.396 --> 00:17:48.856... and things are moving from day-to-day. 37800:17:49.736 --> 00:17:52.596Do try and stay calm. And actually, 37900:17:53.596 --> 00:17:57.356if you are someone who will freak 38000:17:57.456 --> 00:18:01.316out if markets drop by a big amount, then maybe 38100:18:01.356 --> 00:18:04.376you're invested in the wrong places. So that is telling you something. 38200:18:04.396 --> 00:18:07.916But try, if you can, not to obsess, tune out the noise, 38300:18:08.536 --> 00:18:10.096and just get started. 38400:18:10.836 --> 00:18:14.616Yeah. I think especially the monthly 38500:18:14.716 --> 00:18:15.296saving- 38600:18:15.536 --> 00:18:15.666Mm 38700:18:15.666 --> 00:18:19.476... is really powerful for that because it means that every time there's a 38800:18:19.496 --> 00:18:20.376blip in markets- 38900:18:20.456 --> 00:18:20.676Mm-hmm 39000:18:21.276 --> 00:18:24.536... you're investing at that lower price point. 39100:18:24.896 --> 00:18:28.796So it just evens out that volatility all 39200:18:28.816 --> 00:18:30.696the time. It means you don't have to 39300:18:31.676 --> 00:18:33.765worry. But I would say 39400:18:34.736 --> 00:18:38.276if you need reassurance, go and look at long-term 39500:18:38.376 --> 00:18:39.416charts of 39600:18:40.656 --> 00:18:43.696the S&P or the FTSE 100. It's very powerful. 39700:18:45.016 --> 00:18:48.056These blips, when you put them in context, they're pretty small. 39800:18:48.196 --> 00:18:50.956Even though they feel very raw at the time, 39900:18:52.536 --> 00:18:53.716in the long term, they 40000:18:54.616 --> 00:18:55.676just even out. 40100:18:55.976 --> 00:18:57.116So keep calm and carry on. 40200:18:57.236 --> 00:18:59.356Keep calm and carry on. Exactly. 40300:18:59.416 --> 00:19:03.136Cherry, thank you so much. And thank you for joining us. 40400:19:03.196 --> 00:19:06.536I hope you're leaving this first episode feeling a little clearer and a little more 40500:19:06.596 --> 00:19:09.716confident about what investing actually is and how to begin. 40600:19:10.096 --> 00:19:13.276If you'd like to learn more, you'll find plenty of resources in the Learning Zone 40700:19:13.316 --> 00:19:16.796on the Alliance Witan website. Next time, we'll look at the psychology of 40800:19:16.816 --> 00:19:20.696investing and the behavioral biases that can shape the financial decisions that we 40900:19:20.756 --> 00:19:21.806make. Until then.

00:00:04:00 - 00:00:08:15Welcome to ‘Are You Investing Comfortably?’ in partnership with Alliance Witan. I’m Georgie Frost. 00:00:08:17 - 00:00:29:06In our first episode, we covered the basics of investing: what it is, why it matters, and how to get started. But understanding the mechanics is only half the story. Because investing isn’t just about numbers, it’s about behaviour. And the reality is our emotions, our instincts and our biases can influence the financial decisions we make, often without us realising. 00:00:29:08 - 00:00:47:10So in this episode, we’re looking at the psychology of investing. Why do we panic when markets fall? Why do we hesitate to get started? And how can we make calmer, more rational decisions with our money? Well, joining me is Vicky Reynal, a financial psychotherapist and author of Money on Your Mind, The Psychology Behind Your Financial Habits. 00:00:47:12 - 00:00:49:03Vicky, welcome. 00:00:49:05 - 00:00:56:10Vicky, first, what is a financial psychotherapist and what do people come to you with? 00:00:56:12 - 00:01:18:15I’m a psychotherapist that focuses on people’s relationship with money. So people come to me when they feel stuck in a financial behaviour that they can’t change, or patterns that they can’t move out of. So, for example, I see people who might regularly overspend and accumulate debt as a result, or people who can’t spend and enjoy the money they have. 00:01:18:17 - 00:01:33:11I see people who hoard money anxiously, or others that continue to get into conflict about money, with business partners, family, friends. I deal with money secrets and all sorts, so it’s very broad. 00:01:33:13 - 00:01:39:08How do our emotions impact our financial decisions, especially investing? 00:01:39:10 - 00:01:48:01Well, what I find in my practice is that what holds people back is not a lack of knowledge, of not knowing what they should be doing with money, 00:01:48:03 - 00:01:54:13but our feelings that sit behind the scenes, sometimes unconsciously influencing their financial decisions. 00:01:54:15 - 00:02:21:20And when it comes to investing, I think a lot of people have this idea that it’s all about being good at maths or, you know, being an expert, but actually to be a good investor, you have to be able to manage the emotional journey that is investing. And sometimes that’s much more important than picking the right funds. Some of the feelings that tend to manifest in investing are fear or excitement, 00:02:21:22 - 00:02:38:13driving financial decisions, which some people end up speaking in terms of gut feelings. But actually, if we become conscious of those feelings, it could prevent a lot of mistakes, or rash choices in times of panic and high risk. 00:02:38:15 - 00:02:47:01There are a number of different behaviours and biases that can impact our financial decisions, whether we know what the terms are or not. 00:02:47:07 - 00:02:52:05I’m sure listening to this, a lot of people will recognise some of the ones that are going to come up. 00:02:52:07 - 00:02:59:01But, before we get to them, why do we have biases? Where do they come from? What’s the point in them? 00:02:59:03 - 00:03:07:14So there is some cognitive biases that all human beings are predisposed to, and those are evolutionarily hardwired into us. 00:03:07:16 - 00:03:26:15And then there’s our own personal story with money, and also outside of money. So our personality, our experiences growing up, do we feel deserving of good things, including money? Because if we don’t, we might turn out to be an adult that self-sabotages financially. Do we 00:03:26:17 - 00:03:32:21feel that we can make mistakes? Or did we grow up in an environment in which mistakes were very much 00:03:32:23 - 00:03:35:20punished, and we felt very ashamed as a result? 00:03:35:22 - 00:03:59:21Well, we need to be able to make mistakes, to invest successfully. And so there’s things like our social environments, you know: we might have grown up picking up messages that women are not good investors and men are. There’s religious backgrounds in which, you know, greed is shameful and you shouldn’t be wishing for too much. And that could hold us back in the background, when it comes to investing. 00:04:00:00 - 00:04:11:05So I think we pick up these messages growing up throughout our lives, and the more conscious we are of them, the better we’ll be at investing and making other financial choices. 00:04:11:07 - 00:04:21:17Listening to you made me think of something I heard a financial influencer say the other day, which was when he first started, he thought money was 50% psychology, 50% the 00:04:21:20 - 00:04:22:15maths. 00:04:22:17 - 00:04:27:05Now he says 90% psychology, 10% maths. What would you put it at? 00:04:27:10 - 00:04:44:07Yeah I would agree with that actually. I think knowledge is important, and I have to say there’s a lot of people, and the research has shown, that the more you know about finance, the less anxious you are. And that means that if you’re an investor, then the less likely you are to overreact to things, 00:04:44:07 - 00:04:50:03so knowledge is important. But when it comes to investing and the roller coaster that it can be, 00:04:50:05 - 00:04:54:09it is about keeping your cool and focusing on the long-term strategy. 00:04:54:11 - 00:05:06:03When I last got a pay rise, I was delighted… for about a couple of days, and then we start to just build that into our lifestyle. If I lose money… 00:05:06:05 - 00:05:10:16ooof, it lingers a lot longer. Why is that? 00:05:10:18 - 00:05:26:14Well, it’s a cognitive bias called loss aversion, which means that we feel the pain of losses a lot more than we feel the pleasure of gains. And actually research has shown that we feel the pain of losses twice as much as we feel the pleasure of gains. 00:05:26:16 - 00:05:32:00And that can really influence what we do, when it comes to investing, because if 00:05:32:00 - 00:05:35:00we’re so afraid of the pain of loss, 00:05:35:02 - 00:05:44:06then we might avoid it, which means that we might hold on to something that is losing money far too long because we’re afraid of realising that loss, 00:05:44:12 - 00:05:53:24or the opposite: we might, when we’re making money, rush to realise those gains too quickly because we’re afraid that it will 00:05:54:01 - 00:05:56:11turn and suddenly we’ll start losing money. 00:05:56:11 - 00:06:03:12So it’s important to be conscious of this tendency, so that we can recentre ourselves and be more rational in that decision. 00:06:03:14 - 00:06:13:23I’m wondering if this is manifesting itself in the number of people holding money in cash that could otherwise be invested? 00:06:14:00 - 00:06:18:20Is that one of the reasons: this fear of ‘What if I make a mistake?’ ‘What if I lose that money?’ 00:06:18:20 - 00:06:22:08‘I’ll just go with safety.’ What is perceived as safety? 00:06:22:10 - 00:06:48:07Absolutely. I think for some people it’s about holding on to that sense of safety, particularly if in their background, they’ve watched somebody in the family face financial losses, or maybe they themselves have had losses that they’ve struggled to recover from. Other times, it’s feeling like an imposter if you’re an investor, because what you’ve picked up growing up is that, ‘Investing is not for people like us.’ 00:06:48:09 - 00:06:56:03 You know, ‘Investing is for rich people.’ And, you need to have a lot of money to become an investor and can afford to lose it. 00:06:56:05 - 00:07:19:06So you might feel like you don’t belong if you join that club, so to speak. Other times, it’s about the instability of investing that feels too much to handle, and I’ve seen people that have come from maybe quite unstable backgrounds, who are really afraid of re-experiencing any emotional instability which investment can bring up for you, 00:07:19:06 - 00:07:21:09so it can really vary. 00:07:21:10 - 00:07:32:11And it’s interesting talking about cash is safety, because as we spoke about in episode one with Cherry Reynard, talking about the basics of investing, actually 00:07:32:13 - 00:07:37:23holding your money in cash in the bank does have its risks in terms of inflation, 00:07:38:00 - 00:07:48:23low interest rates. Yet even though we are aware of that, it still feels safer. 00:07:49:00 - 00:08:09:06I think as humans, there’s something about familiarity that is incredibly appealing. And the cognitive term for it is ‘status quo bias’, which is basically our tendency to keep things as they are, because we’re afraid of change. We’re afraid of the , of uncertainty, and so 00:08:09:08 - 00:08:17:20it’s easier, it feels safer emotionally at least, to keep money in cash, because then we’re shielding ourselves from the millions of 00:08:18:01 - 00:08:23:02choices that might come with opening the investment lid, if you will. 00:08:23:04 - 00:08:33:08You know, where do we start? Who do we go to? How do we do it? And all of that can become very quickly overwhelming for people, which is why they might stay away from it. 00:08:33:10 - 00:08:39:18I have to say, one bias that I hadn’t heard as much about as the other ones, is something called recency 00:08:39:20 - 00:08:41:17bias. Very relevant right now, 00:08:41:17 - 00:08:46:00you’re talking about uncertainty going on in the world. Just tell us about that. 00:08:46:02 - 00:09:05:04Well, it’s our tendency to give more weight to recent events, than to things further away in the past, which means that we make the assumption that whatever is happening now, like the volatility that we’re seeing at the moment, is going to continue, and that can influence our choices. 00:09:05:06 - 00:09:07:02But actually 00:09:07:04 - 00:09:14:02what we need to keep in mind is that markets have downturns. You know, they go up and down over time, 00:09:14:05 - 00:09:25:08and this could be just a phase in the cycle. But it’s very difficult to keep that perspective, and the reason why we’re so susceptible to that bias is because as human beings we like things to be predictable. 00:09:25:13 - 00:09:39:17And so we hold on to what we’re seeing and imagine that it’s going to continue this way. But as investors, it’s really important not to do that and to look at the wider picture, to make our choices. 00:09:39:19 - 00:09:50:23Perspective, I think, is the key word there, because there are things certainly you can learn from this volatile environment we’re in. 00:09:51:02 - 00:09:55:17Hopefully it won’t last for ever, but sort of building in flexibility, 00:09:55:19 - 00:10:02:09trying to filter out some of the noise, are all lessons you can learn in these uncertain times, I imagine? 00:10:02:11 - 00:10:13:17Yes you can, but I think it’s about becoming conscious of what your tendencies are. What do you tend to default to – is it fear, is it overexcitement? 00:10:13:19 - 00:10:30:11I’ve seen investors who feel like they have a lot to prove, and they use the markets as their stage, and so they take on a lot of risk, hoping that finally they’ll be proven right. And so if you know that you tend to do that, you tend to get a little bit reckless when you feel like there’s an opportunity to prove yourself; 00:10:30:11 - 00:10:45:15well, that’s the part of you that you need to hold yourself back from. So, the more you understand what drives you, what it ticks in you when the market does something, then the more you stand a chance to control it. 00:10:45:17 - 00:10:53:15That idea of using the market to prove yourself does not resonate with me. Imposter syndrome does. 00:10:53:17 - 00:11:05:03And I do hear this a lot more. I don’t know if it’s more acceptable to talk about having imposter syndrome, but even with people you can’t believe, you think they must be the most confident people in the world, have it. 00:11:05:05 - 00:11:11:04Because it’s not about how much money you have, or about your capabilities, it’s about your confidence. 00:11:11:06 - 00:11:27:18And a lot of people, despite evidence of financial success, they still feel like an imposter. And some of the characteristics of imposters is that they attribute any success they’ve had to luck or external factors, being in the right place at the right time, and so on. 00:11:27:20 - 00:11:33:23And any time anything goes wrong, they blame themselves. It’s all internal. It’s all about their 00:11:34:02 - 00:11:39:21inadequacies or how little they know, and they live in fear that they’re going to be found out. 00:11:39:23 - 00:11:56:08And that can really hold people back, because if you live with that fear of being found out, then you might not take a lot of risk, not to be exposed, you might be small in your financial ambitions and that, you know, can really mean you miss out on a lot of opportunity. 00:11:56:10 - 00:12:06:06I think this is something that, beyond investing and beyond finance, is something that a lot of us probably need to do more of, and that’s talk more kindly to ourselves. 00:12:06:08 - 00:12:08:16How do we start to do that? 00:12:08:18 - 00:12:28:13Well, there’s so much shame around money, I think that’s the main thing that holds people back from talking about it, a lot of people are worried that speaking about money will expose them to some kind of judgement, either about how little they know or it will, you know, place them socially… what will people think? 00:12:28:13 - 00:12:32:23Are they making too much or too little? And 00:12:33:00 - 00:12:41:16whichever angle they look at it from, it can feel really exposing, but actually what people tend to find when they do talk about money, is a sense of relief 00:12:41:20 - 00:12:52:14that everybody else doesn’t have it all figured out. People share their same anxieties or uncertainties when it comes to making financial decisions. 00:12:52:19 - 00:12:59:05So I always encourage people to talk more about it, because it’s also a way of learning more about money. 00:12:59:07 - 00:13:14:04Listening to you makes me think that perhaps money is not the problem at all, and actually what it is, it’s a manifestation of an underlying issue. And oftentimes we don’t want to look at underlying issues. 00:13:14:06 - 00:13:15:18How do we begin to do that, 00:13:15:18 - 00:13:24:20so we can start having a better relationship with money, start making more confident financial and investing decisions? 00:13:24:22 - 00:13:41:10Well in order to feel more in control of your choices, you have to understand what’s driving them. So exploring, what is the fear about? Is it fear that you will lose it all and end up like your parents? Or is it actually a fear of missing out? 00:13:41:12 - 00:13:56:04And depending on your background, your experiences, the thing that is stopping you from investing, or is making you rush too quickly into things, will be different. So if you understand that, you stand a chance to change it. 00:13:56:06 - 00:14:10:02But also hold in mind the opportunity cost when you’re staying stuck in the situation you’re in, avoiding financial choices, you’re paying a high price, not just financially. 00:14:10:04 - 00:14:30:18You’re also paying an emotional price that many people don’t recognise or take into account. Because when we know that we should be doing more with our money and letting it work more for us, but we’re not doing it, it leaves us with a base level of anxiety and of guilt and sometimes even regret of all the money we could have made if we had started earlier. 00:14:30:22 - 00:14:32:21So I think that’s important to keep in mind. 00:14:32:23 - 00:14:50:06As a financial journalist, I think about this topic quite a lot, and I do try to explore my own life and my own behaviours and biases with money. But even though I’m very aware of all of these things, it’s sometimes very hard to understand how this is actually playing out, why this is. 00:14:50:09 - 00:15:00:22Is there a sort of a practical toolkit almost? That let’s say I came to you and said, you know, ‘I can be quite impulsive when it comes to investing decisions.’ 00:15:00:24 - 00:15:14:01Exploring the why will help me stop, but what practical tips, I suppose, would you have? What should I be doing to really explore the knowns, and the s? 00:15:14:03 - 00:15:32:24I would start with noticing patterns, see when you get triggered, what is it? How are you feeling in that moment? A lot of people benefit from journalling right before making a financial choice, you know, what are they feeling? What do they imagine will happen? What do they imagine it will feel like if they act or don’t act? 00:15:33:05 - 00:16:00:12And that can really bring to life some of the commentary that might be sitting there unconsciously making choices for you. And then when you look at it, you can spot it much faster the next time, and it’s about building time between an emotional reaction and a financial action. And building that thinking time into it is what’s going to help you change those patterns. 00:16:00:14 - 00:16:03:15Vicky, absolutely fascinating. Thank you so much for your time, 00:16:03:17 - 00:16:20:05and thank you for joining us. I hope this episode has helped you see that investing isn’t just about markets, but also about behaviour, and understanding your own instincts and biases is a really powerful place to start. If you’d like to explore this further, you’ll find more resources in the Learning Zone on the Alliance Witan website. 00:16:20:07 - 00:16:26:14In our next episode, we’ll turn to financial goals and the practical steps you can take to achieve them. Until next time.

00:00:04:03 - 00:00:21:11Welcome to ‘Are you investing comfortably? in partnership with Alliance Witan. I’m Georgie Frost. Throughout this series, we’ve looked at what investing is, and how our behaviour can shape the way we invest. In this final episode, we’re focusing on something that brings it all together. Goals. Because most of us know we’re investing for the future. 00:00:21:16 - 00:00:33:05But unless that future is defined, it can be hard to stay focused. Clarity creates focus, and focus builds discipline. And discipline and consistency are what make long-term investing sustainable. 00:00:33:07 - 00:00:43:07Well, joining me is James Beckett, a financial educator, and founder of Money Stocker, a company dedicated to helping people access sensible guidance and gain financial independence. 00:00:43:11 - 00:00:52:12James, thank you so much for joining us. Before we actually get into how to set financial goals, why do they matter so much, particularly when it comes to investing? 00:00:52:14 - 00:01:18:05Yeah, it’s a great question. I think that goals are ultimately your North Star. They keep you on track, they keep you disciplined and motivated. So if you imagine, for example, you’ve got £200 in your pocket, you could go out and spend that on maybe a new pair of shoes, a new gadget or gizmo, or you could invest it for the future for some vague idea of you wanting a pot of money in the future. 00:01:18:07 - 00:01:38:14That’s not really that inspiring. A lot of people will just choose the immediate thing now. Whereas if you actually have a goal that you’ve set, maybe it’s: ‘I want to have my first home,’ ‘I want to retire early,’ whatever it might be. If you have that, you’re more likely to actually stick and say, ‘No, I’m not going to waste my money on something I didn’t really want anyway. 00:01:38:19 - 00:02:08:23I’m actually going to put my money towards that future thing.’ I would say as well that when I first started investing, I didn’t have a goal. I put my first £50 in maybe 12 years ago, I think it was. And it was just to wonder if I would actually have £50 a year later. I wasn’t thinking about goals and I would say to anyone that’s watching this, that’s totally fine initially if that gets you through the door, because the hardest part about investing is actually starting. 00:02:09:00 - 00:02:18:07But ultimately, if you want to be successful, you’re going to want to set that goal and work towards something, because it’s going to keep you on track. 00:02:18:09 - 00:02:26:23Setting a financial goal in the near term, let’s say getting married, potentially even buying a house, is a lot easier, 00:02:26:23 - 00:02:51:06and it’s also a lot easier to visualise, particularly with weddings, particularly with houses. Thinking about myself in the future is a lot harder to do. And with so many pressures, cost pressures around us at the moment, it can feel quite easy to think, ‘I’ll just kick it into the long grass, something I’ll deal with later.’ How do you stay focused, particularly on those longer-term goals? 00:02:51:08 - 00:03:13:06Yeah, really good question. The way I do it is that I make sure I get little rewards now, as well as rewards in the future. So you set short-term goals, you set medium-term goals, you set long-term goals. And I find that when I’ve achieved even short-term goals, like getting a full deposit and buying my first home, that was an amazing feeling and it’s so fulfilling, 00:03:13:08 - 00:03:36:02and that kind of motivates you to keep going. And you realise that, you know, the longer you have this delayed gratification of waiting for that big goal and working towards it, the greater the feeling and the more motivating it is. And so with these long-term goals like retirement, I set myself little milestones so I can get little dopamine hits every now and then. 00:03:36:07 - 00:03:54:13I’ve actually got an app on my phone, which is a little bit nerdy and sad, but I basically just log into that every month and it tracks my goals. And so it says you’re 30% to your goal of retiring by 45. That’s my goal. And that keeps you motivated. 00:03:54:13 - 00:04:19:06I update it with my performance every month and it gives me those little hits, so that it doesn’t really feel like a long-term goal for me, because I’m sort of seeing it every day. I’m working towards it, I’m purchasing freedom for my future. What you said about it being difficult right now in terms of, you know, how can you afford to actually put money towards the future when there’s so many cost of living issues? 00:04:19:08 - 00:04:40:04I would say that for the longest-term goal, like for investing for retirement, you can use things like your pension or a SIPP. And that will let you get top-ups from the government, or money back in the form of higher-rate tax relief. So you could put in, you know, £100 and it’ll actually only cost you in your pay packet, something like £60. 00:04:40:06 - 00:05:02:13So you can make your money stretch further by using certain tax-efficient accounts, for example. And I would also say if you’re really struggling right now and, you know, you’re probably quite young listening to this and I would class anything as 50 as a long investment horizon personally, because Warren Buffett was investing until he was 96. If you’re still quite young, you’ve got time to catch up. 00:05:02:14 - 00:05:07:22So I would say, don’t stress. You know, I wouldn’t want anyone to overextend themselves, 00:05:07:24 - 00:05:11:11because generally speaking, your pay00:05:11:13 - 00:05:20:23goes up in line with your career. So you’ll have time to catch up, so I wouldn’t worry too much about falling behind or feeling like you can’t do enough right now. 00:05:21:00 - 00:05:42:06That’s great information. I’m fascinated by your app that tracks your financial goals. And the reason I am is because – and a lot of this comes down to ‘know thyself’ – you know, what sort of person am I? How do I behave in certain scenarios? Am I the sort of person that would become quite obsessional over making sure I’m on target? 00:05:42:06 - 00:06:00:08Because as we know, the stock market can go up, and it can go down. You can have bad months. Bad years. How do you disassociate yourself almost from the noise, and the movement and the volatility, so you can still stay focused and still enjoy life? Because that’s important too. 00:06:00:10 - 00:06:09:24 Yeah, I mean I warp my thinking a little bit to be perfectly honest, because when the stock market goes down, I just see it as a buying opportunity. 00:06:10:04 - 00:06:25:08One thing we might talk about is pound cost averaging, which is where you buy while the market is high and while the market is low, and now the market is low, I get more shares for my money when I’m buying now, so because I’m investing for the long term, that sort of thing doesn’t affect me. 00:06:25:10 - 00:06:43:20But I can tell you if people watching this, listening to this, haven’t started investing yet, the first time the market goes down, it is painful, and you might not want to look at it. You might panic, you might want to withdraw your money, but you just have to remind yourself why you got into it in the first place, what your goal was. 00:06:43:22 - 00:07:02:21Stick to the strategy and know that the stock market has recovered 100% of the time, which is massive to know. Every time it’s gone down, it has always come back up. It doesn’t guarantee the future, but it is reassuring. A lot of people might not be like me, they might not want an app to track their goals, and they might not want to be monitoring it too closely. 00:07:03:02 - 00:07:21:16My fiancée, for example, she hadn’t logged into an investment account for a year. She missed all of the panic around Trump’s tariffs last April, she missed everything to do with that, and she just kept investing on autopilot because she knows what a goal is. She doesn’t actually need to log in, whereas I love being that hands on and I love posting about it. 00:07:21:18 - 00:07:30:09So there’s no right or wrong answer. Whatever you can do to manipulate your own psychology to stay consistent, that’s fine. 00:07:30:11 - 00:07:35:01Is there ever a time that the market dips that you would suggest anybody rethinks their portfolio? 00:07:35:03 - 00:07:42:10I would say that if you have to rethink your portfolio, you probably weren’t aware of the risk and volatility, how much you can go up and down. 00:07:42:10 - 00:08:08:11You probably didn’t factor that in because I’m quite comfortable – personally, this is just me – with the fact that the stock market could crash 40% at any moment and that would be a little bit devastating, but I’ve accepted that by choosing my strategy, which is quite high volatility, that that can happen. If that sort of thing does scare you, then I think it’s fine to reassess your goals, 00:08:08:11 - 00:08:24:01maybe moving some slightly less volatile assets like bonds, for example. But generally I would try and get it right first time, make sure you’re not going for NFTs or cryptocurrency that could fall through the floor. I would just be a bit more cautious. 00:08:24:03 - 00:08:28:21And of course, if you are unsure you can always speak to a financial adviser or financial planner. 00:08:28:23 - 00:08:43:13Let’s return to goals. How fixed should your goals be? Because there are many moments in your life – you spoke about your fiancée there – you know, you might be getting married, having children, coming up to retirement, where your plans might need to change slightly. 00:08:43:15 - 00:08:49:07Yeah, definitely. So I would say that firstly, you should try and keep your goals fixed. 00:08:49:09 - 00:09:07:09And that’s because, you know, if you see that you’ve got £30,000 in your Stocks and Shares ISA, you might decide actually, ‘That could buy me that new car that I wanted.’ You might get tempted to do other things, you might say, ‘I’m just changing my goals,’ but really you’re just sort of sacrificing what you were working towards. 00:09:07:11 - 00:09:24:03So I would try and stick to your goals as much as possible. With that said, you brought up my fiancée and when I first started dating her, she had more in her Lifetime ISA. We were both saving for a house, we didn’t know each other, but we were both saving for a house 00:09:24:03 - 00:09:46:09and she had more in her ISA than me. So when we decided to buy, actually, she was ready for her half of the deposit and I wasn’t. So I had to take money from my ‘long-term freedom fund’, which is what I called it, to actually catch up with her. And that technically put me a bit behind on my goal, you could say, but you know, you’ve just got to roll with the punches of life. 00:09:46:11 - 00:09:49:14And I got a house, I got equity in a house. So that’s fine. 00:09:49:14 - 00:09:58:10And it put you in front, I presume, of another goal. Take from one long-term freedom fund to the buying of the house, which was quicker than it would have been had you not taken that money, surely? 00:09:58:10 - 00:10:04:24Yeah, absolutely, so it works out. Now, your goals might change for positive reasons like that, 00:10:05:01 - 00:10:23:01or they might change because you get a big pay rise or promotion and you’ve got more money. You can work towards your goal quicker. So they might evolve for positive reasons, and they might evolve for negative reasons. You know, I’ve been through a redundancy process before. I had to put my investments on pause and I didn’t give up on my goals, 00:10:23:01 - 00:10:36:11I didn’t give up my dreams just because I was made redundant for a few months. It just made me sort of put things on pause, and you could argue that put me off track, but I was able to catch up and, you know, I was able to adapt my goal. 00:10:36:17 - 00:10:42:01And the reality is life happens, things happen. I went through a major back injury in my 20s, 00:10:42:01 - 00:10:58:11I had to stop putting money into my pension. I keep reading articles about how much money I will have lost in the long term, but the reality was, I had no choice. The only thing that you should do is make that promise to yourself that, as soon as I am able, I will get back to it and get back on target. 00:10:58:12 - 00:11:18:23But often it’s not easy, as you say, life happens and you need to have a plan that adapts with that, and don’t beat yourself up. But once a goal is clear, the key thing, I suppose, is getting into those good habits, building that momentum. And I want to run through three, particularly, and the first one, is building a positive pay day habit. 00:11:18:24 - 00:11:20:11Tell me about what that looks like. 00:11:20:13 - 00:11:41:12Yeah. So this is the concept of paying yourself first. So it’s the idea that before you do anything, as soon as that pay cheque lands in your account, you put that money ideally automatically into your investments. So before you pay your bills, before you pay anyone else, before you go out and spend that money, you’re paying yourself first, future you, not you today. 00:11:41:14 - 00:12:05:13And that sounds quite empowering, almost. ‘I’m paying myself,’ ‘I’m looking after myself.’ I think the real reason it works is because you never see that money in your account, and so psychologically, you feel poorer that month and you don’t spend it. We talked at the start of the episode about how, if you’ve got £200 in your account, you might just go out and spend that. 00:12:05:15 - 00:12:32:23But if it’s not in your account, you’re not tempted to. And so you’ve got to use all the psychological tricks at your disposal, because honestly, 90% of the battle is so much psychology. You’ve built this plan, you know if you stick to it, you are most likely going to hit your goal. But if you don’t invest every single month, if you decide to change for some reason, if you don’t pay yourself first, you could easily go off track. 00:12:33:00 - 00:12:49:17And this applies for other sorts of pay-related things. So if, for example, you get a pay rise. What I personally like to do, is split all my pay rises 50/50. I try and reward myself today, because I’ve worked hard for it, I think. 00:12:49:19 - 00:12:59:02That’s an important message, and I think it’s often lost. But actually you work hard and you should enjoy your money, and if you’re trying almost too hard and not enjoying life, then it’s going to become very miserable. 00:12:59:02 - 00:13:03:04And also very difficult when you do reach that goal to actually spend and enjoy that money. 00:13:03:04 - 00:13:21:02That’s a big issue that people get. I think people watching this, that have an interest in investing, will probably suffer from that, that once they’ve actually accumulated that pot, spending down is really hard to shift from saver to spender. But I would definitely recommend rewarding yourself now and in the future. 00:13:21:04 - 00:13:41:08It’s not that scientific. You know, a lot of people like to say, what percentage of your salary do you put towards your goal, and just splitting things 50/50 sounds odd maybe to some people, but I need that. I need to have that reward today because tomorrow’s not guaranteed. But I also want to know that my future is safe. 00:13:41:14 - 00:13:42:23So that works for me. 00:13:43:00 - 00:13:51:10The second habit is investing regularly. Why is it, that consistency often trumps waiting to invest a lump sum? 00:13:51:12 - 00:14:09:11Well, it means that you can benefit from things like pound cost averaging, and that’s where you buy every single month. Sometimes when the market is high, sometimes when the market is low, and that has the effect of smoothing out some of the volatility. 00:14:09:13 - 00:14:31:24So if you invested, for example a lump sum once, and the market went down, that can be quite jarring for some people. Whereas if you invest consistently over time, hopefully the market’s going up. It does about two thirds of the time, historically. You’re benefiting from the little dips along the way, you’re buying more shares, 00:14:31:24 - 00:14:53:02so when the market is going up you see a bit more of a benefit. And I think again, psychologically, investing monthly is a lot easier for people to wrap their heads around as well as practically, because you get paid once a month, usually, most people. So most people default into this pound cost averaging approach of investing regularly. 00:14:53:04 - 00:15:11:06And I just think it’s the best strategy, because investing a one-off lump sum is great. But it’s not really a strategy. It’s not really a discipline. So I would definitely recommend anyone would follow, for most goals, some sort of pound cost averaging strategy. 00:15:11:08 - 00:15:16:11But if there is a dip, are you not tempted to stick in a little extra? 00:15:16:13 - 00:15:37:01Some people are, but that is just really a form of market timing. You know, because that means that you’ve been holding on to perhaps more cash than you should, and it’s good to hold onto cash. But if you’ve been holding on to a lot of cash waiting for a dip, then most likely you’ve just missed, maybe years of growth, while you’ve been holding that cash. 00:15:37:03 - 00:15:57:02And what people will find is that when they then invest that money, because they’ve been waiting for the dip and the market’s gone down 10% and are like, ‘Yes, I can invest it,’ the market just falls another 10%. Because you basically have to get two things right. You have to work out when the market’s hit the top, and then when it’s hit the bottom, 00:15:57:02 - 00:16:14:08and that’s effectively impossible to do. So when people say ‘Buy the dip,’ it just doesn’t really make sense in my head. Like, I guess if I had some cash on hand, maybe. But really, you’re saying that ‘I was waiting for this dip and now I’m going to put the money in.’ So again, that’s my logical brain thinking. 00:16:14:08 - 00:16:26:01A lot of people prefer the sort of emotional side of investing where, ‘OK, now the market’s dipped, I feel a bit more confident that it’s going to go back up again, and I’ll have less volatility,’ It’s not what I would do, though. 00:16:26:03 - 00:16:38:18The final piece around the dip is around the volatility. As we’ve spoken about people that go in and put money in when there’s a dip, people that, like your fiancée, don’t even check so they wouldn’t know and do nothing. 00:16:38:18 - 00:16:47:10But there are a lot of people that pull their money out in those times. How do you stay disciplined? 00:16:47:12 - 00:16:59:20Really tricky. Yeah, it’s really tricky. A lot of people panic when they see the news headlines, that there’s a new sort of geopolitical issue, there’s a new pandemic, there’s a new crisis of some kind. 00:16:59:22 - 00:17:18:20It’s really difficult. I would just try and remind yourself, first of all, of your goal, why you got in there. Remind yourself that you knew that the stock market was going to dip. It’s not a straight line to the top 10%, 7% every year, whatever people have in their heads, it’s not going to be a straight line. 00:17:18:20 - 00:17:40:13And like I say, I actually just view it as a buying opportunity. Why would I sell while the market is down? That doesn’t really make sense. They say buy low, sell high. And you don’t want to get it the wrong way round. So yeah, for me personally, if there’s volatility I don’t mind it. 00:17:40:15 - 00:18:02:12And if you’re scared about that, if you want to pull your money out, that potentially means that you’ve got your mix wrong. Maybe you’re not quite as diversified as you thought you were. Maybe you’re in 100% equities, maybe you’re 100% overweight to one country like the US, whereas maybe you should be spread out across maybe commodities and bonds as well as equities. 00:18:02:14 - 00:18:11:02So if that sort of volatility scares you, I would just take a second and re-evaluate your goals, re-evaluate your strategy. 00:18:11:04 - 00:18:17:17How often do you think you should do that anyway? Or is it a case of close the book, leave it for 20 years? 00:18:17:19 - 00:18:28:17It’s a good question. Investing is a long-term thing, so I wouldn’t really be re-evaluating less than yearly. 00:18:28:19 - 00:18:46:01A lot of people say don’t even check into your portfolio more than quarterly. I think that’s a good strategy. I always say don’t invest unless your horizon is at least five, if not ten years. So maybe that’s a good time to sort of re-evaluate if after five or ten years, you can check in and see how it’s doing 00:18:46:01 - 00:19:05:21absolutely do that, and make sure your automations are still working and all of that. But I would say that, yeah, you don’t really want to be re-evaluating too often. Because you picked your goal at the start. For me personally, I’m a passive investor, so I just put it in one thing, one diversified thing and let it run. 00:19:05:21 - 00:19:22:14And I’m not going to change that. I’ve sort of made that commitment to myself, but other people might get it wrong. Initially, I got it wrong. Initially, I put it in a fund that wasn’t suitable for me, and I did have to re-evaluate. It was too biased towards the UK, I felt in the end. So I have re-evaluated and I get that. 00:19:22:16 - 00:19:42:09And as you learn more about investing and about yourself, about your own risk appetite, it could happen. But generally speaking I would say don’t tinker, because tinkering is where things can go wrong. Tinkering is where you start racking up costs from all the trading. And yeah, you’re just more likely to go off track. I think. 00:19:42:11 - 00:19:54:05Obviously this is an investing podcast, but I want to be clear, because we’ve spoken about setting goals and investing almost interchangeably, but there will be some goals where investing is not suitable to reach? 00:19:54:05 - 00:19:55:01Definitely. 00:19:55:03 - 00:20:16:09I would say that the first goals you should focus on really, the very shortest-term goal, which is usually getting an emergency fund of some kind, and you want to store that in something like a Cash ISA, perhaps, or maybe Premium Bonds, whatever you’re comfortable with, whatever your allowances, whatever you have. And your very furthest goals, 00:20:16:09 - 00:20:36:21for me that is retiring, because often your employer will match some of your contributions, you don’t want to miss that free money. So I like to focus on the extremes, and those extremes have very different matches of what you actually do with your money. So the very extreme goal of investing for 40 years away is going to have more risk, 00:20:36:21 - 00:20:59:20it’s going to have equities, stocks most likely, maybe bonds. Whereas the nearer-term goals like an emergency fund, maybe even saving for a deposit on a house, maybe even, your wedding, if it’s less than five years away, you might store that in cash, or a very low-risk sort of money market fund or potentially bonds. But generally speaking, you’re going to want to keep some of that in cash. 00:20:59:22 - 00:21:16:12You must have learnt so much along the way, and you’ve imparted so much financial information to people. But if there was one piece of information you wish you could download from your brain into everybody else’s, related to goal setting and investing, what do you think it would be? 00:21:16:14 - 00:21:25:08That is a really good question. I would say, wow… there’s so many things I would say…Top three! 00:21:25:10 - 00:21:42:05Top three. Well, I would definitely look at writing down your goal first of all, so that doesn’t have to be an app like I do it. You could just write it down in your Notes app, you can make a spreadsheet, you could just tell your partner or friend. I think it makes you way more likely to achieve it, 00:21:42:05 - 00:22:06:15if you make it real, you say out loud, you make it tangible. I would definitely say maximise all of your allowances. You know, so many people start investing using the general investment account. They don’t use their Stocks ISA. They don’t realise how powerful SIPPs are. They ignore things like Lifetime ISAs for the deposit. So try and get a really good handle on all of the account options, because you can make your money stretch further, 00:22:06:15 - 00:22:12:15you can minimise your tax liabilities. Third, I would 00:22:12:17 - 00:22:19:09go with fees. Fees are so important, because so many people don’t really understand that 00:22:19:11 - 00:22:24:05your fund that you decide to pick, it might have lots of different fees within that. 00:22:24:05 - 00:22:49:14It might have admin fees, platform fees, trading fees, FX fees, and these can eat into your portfolio over time. So that’s the one thing that you can actually control as an investor, fees. Whereas what the stock market does, we don’t have a tonne of control over, ultimately. But fees you can look at and scrutinise and actually make sure that you’re not being ripped off and that you’re actually getting value for money. 00:22:49:16 - 00:22:54:10And it’s not cutting into that compounding effect that you get from investing. 00:22:54:10 - 00:23:09:17I’m glad you mentioned fees, because it’s not something we do focus on a lot, is it? Even though it’s vastly important, any investment journalist or financial educator will tell you how important it is. And I wonder if it’s because we look at such sort of small percentages and think, oh, well, what’s 0.5%? 00:23:09:18 - 00:23:15:01But it can really, really make a difference, can’t it, to your end result and your end goal? 00:23:15:01 - 00:23:30:13Absolutely. I would say to anyone listening, type into Google ‘investment return calculator’ and change the return from, let’s say 7% average to 6% average, because you’ve lost 1% to fees. And just see how that affects your long-term returns. 00:23:30:15 - 00:23:52:21And you’ll go, oh, I could lose tens of thousands by not actually concentrating on what I’m paying for my investments. Because, if you think about how investing, why it is so powerful, it’s because of compounding returns, because that money starts making its own money over time. And if you take away just 1% of that, that’s money that’s not compounding for you. 00:23:52:22 - 00:24:01:111% sounds small. If you add that up over years, what it could have been, you lose so much. So it’s so important. 00:24:01:13 - 00:24:04:08Is your goal retirement by 45? 00:24:04:10 - 00:24:16:02Yeah, I feel more comfortable talking about it now, because I’ve posted about it on social media so much, and it helps me be accountable in a selfish way by telling other people about it. 00:24:16:04 - 00:24:22:17Why? Why did you pick that? 00:24:22:19 - 00:24:39:00Because ten years ago when I started work, it was always that everyone had this idea in the head that you retire when the government says about what, 68, is the state pension age now and then I stumbled across investing, as most people do, because you’re not really taught about it in school. 00:24:39:02 - 00:24:58:20I read a book about it and I realised that actually if I just put £200 a month aside, I could shave off maybe five to seven years of my retirement. And then I thought, well, as I’m progressing in my career, I can actually shave off more. And then I realised that I started my own company, my own page, and I was telling people about this. 00:24:59:01 - 00:25:23:10I realised that everyone can do this if they start early enough and they just are consistent over time. I chose 45 because I want to inspire other people and my goal is to retire early, but really it’s to become financially independent, to make work optional. I love doing stuff like this, but I don’t necessarily want to be in a 9-5 for ever, and 00:25:23:15 - 00:25:48:22even if I love it now, I might not in the future. So I just want to have that freedom fund. And I landed on 45 because it’s a nice number. And it also just happened to align with my goal. I wanted to get £400,000 in my Stocks and Shares ISA and £450,000 in my pension, which will hopefully then just keep compounding after I stop contributing to it until I can access it at about 58. 00:25:48:24 - 00:26:11:19So I’ve been very specific with my goals and that’s helped me keep on top of them. And ever since I’ve made them public, to be honest, that accountability has just made them skyrocket. We’ve had a great stock market, of course, as well, but it’s made me really focus on them. So I’d highly recommend setting an ambitious public goal if you can. 00:26:11:20 - 00:26:21:18Well, that’s it. You said write it down, make it public, make it accountable. Because honestly, whether it’s a fitness journey or a financial journey, it does make a difference, doesn’t it? 00:26:21:20 - 00:26:31:02Yeah, absolutely. You know, there’s some school of thought that says when you tell people your goal, you’re less likely to achieve it, because you get this little dopamine rush. 00:26:31:04 - 00:26:47:18Is that right?I saw that on a TED talk, so maybe take it with a grain of salt. But I don’t think that is true, because I think if you write it down and if you’re public about it, if you tell your partner that this is what you’re doing, I think it does hold you accountable. So I highly recommend it, 00:26:47:23 - 00:26:48:16absolutely. 00:26:48:18 - 00:26:54:05 James. Good luck. I’m sure you’ll achieve your goal. Thank you so much for spending time with us. Thanks, Georgie. 00:26:54:07 - 00:27:03:01And thank you for joining us. I hope this series has helped you see that investing works best when it’s built on clear goals, steady habits, and an understanding of your own behaviour. 00:27:03:03 - 00:27:08:09If you’d like to explore this further, you’ll find more resources in the Learning Zone on the Alliance Witan website, 00:27:08:09 - 00:27:14:17where you can also listen back to all our previous episodes. Thank you for watching and I hope we’ve helped you find your investing comfort zone.