Once you get past the old idea that you can’t beat the markets, you’re still likely to hear people sucking their teeth and telling you why you shouldn’t invest in shares.
It’s only for the wealthy I’m surrounded by people who think buying stocks and shares is only for wealthy folk. There was an element of truth in that before the ‘Big Bang’ stock market deregulation of the 1980s, which paved the way for low-cost, execution-only stockbroker services.
But we’re now in a situation where you can buy and sell shares for charges as low as around £10 per transaction (and even lower for some services with some restrictions, like pooling your cash with others and only trading on specific days). Even adding on the 0.5% stamp duty (i.e. tax) charged on share purchases, it still makes investing sums of £500 to £1,000 feasible with low percentage costs, and some restricted services make sums as low as £200 realistic.
There are online brokers that will allow you to transfer in as little as £20 per month, and take your time to build up a suitable investment amount.
It’s only for experts Want to invest in the FTSE 100 and share in its record of beating the pants off savings accounts over more than a century? The only expertise you need is to learn how to open an online stockbroker account, transfer in some money, navigate your way around the website and say “invest it in your FTSE 100 tracker fund please.” That’s it. Then just sit back for the next few decades, topping it up whenever you can, and watching your pot accumulate.
Even if you want to choose your own shares, you don’t necessarily need to become much of an expert. One of my favourite long-term, low-effort, strategies is to build a portfolio of dividend-paying FTSE 100 shares, selecting across a range of sectors. All you need to know is how to tell what sector a company is in and where to find its dividend.
Of course, you can learn how to analyse companies in more detail and spread your potential range of investments to cover all sorts of stocks across the markets if you want. But you really don’t have to.
It’s far too risky “Ooh, risky, you could lose everything.” How often do you hear that when you say you’re thinking of buying shares? I’ve even heard it from… a financial adviser. I was taking the legally-required financial advice to gain control of a protected-benefits pension, and my suggestion that I wanted to invest it all in shares was seen as horribly risky.
My question “what’s risky about buying FTSE 100 shares and taking 5% in dividends every year for the next decade?” was met with uncomprehending silence — it just says in the rules drawn up for advisers that stocks and shares are high risk.
The truth is the longer your investment horizon, the lower the risk. If you plan to invest for a couple of decades, the chance of shares beating all other forms of investing is very high, and your chance of losing it all is close to zero.
Views expressed in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019