Why did I check the quote tweets on this? I knew they were going to depress me, just wall to wall people who are going to be poorer than they should be in old age who think that “invest more in stocks and shares ISAs” is some kind of spiv’s charter and not, you know, important advice.
That's obviously true. I think the problem is that the reputation of IFAs, bank advisors etc have been trashed (because of the actions of a sizeable minority) so ppl are scared to trust anyone with their money.
Yup. NatWest tried to “advise” me how to invest the month after they had been bailed out by the government. “Would you like to meet our investment expert “ was their speil. Never trust a bank on investment : look at their records.
Wasn’t one of the aims of Thatcher’s privatisations to create “a share holding democracy?” If it was then it failed. My Dad bought BT and TSB shares and like the vast majority of the public sold them within a few days for a profit.
I’m a financial spud who thinks current capitalism is about privatizing profit & socializing risk (evil), & ‘financial services’ is synonym for tax avoidance (evil): “Hmm, work pension is going up steadily.” “Hmm, work pension lost 20% of its value after Trump had a brain fart.” “Hmm, no thanks.”
? Most responses are just saying they can't afford it. Which is unsurprising.
Aye, but there are also a lot of people who can't afford to invest in the sense that they a) have few savings as it is b) need them where they can get at them ASAP if needed, not in something designed for longer term. The days it takes to liquidate shares in a S+S ISA is no good when boiler go poof.
But those people are irrelevant to this problem, which is of people who *can* save, saving badly.
I think though if you've been in that position, but aren't now, it's still instinctive to want your money somewhere you can get at it more or less instantly if the shit hits the fan again. (That and the idea in this country that shares are Rich People Stuff Not For The Likes Of Us.)
(I am one of these people btw, can't bring myself to put my entire emergency fund in mine as well, especially with the US economy being what it is right now.)
Dunno - my blind pensioner friend had all his money piled up in ISAs and was very sharp about moving it around for the best rates. He'd been a self-employed carpet fitter before his disability. I think you just need to have a big enough pot of money to start thinking in terms of investing.
People become middle class as soon as they have something to be middle class about. That was Thatcher's great insight.
'Aspirational working class' is very much a thing, the fear of being common
A few days ago I was at a funeral. There was a young man there with an earring and wearing a light blue suit instead of a funeral suit. Thank God my nan died years ago, she wouldn't have stopped going on about that suit for the whole of the M5.
Ignore sentimental piffle about "close knit communities" from people who've never lived in them, and consequently don't appreciate why everyone gets out as soon as they have a real opportunity.
That's where I keep falling into the reality gap. The idea that there could be people able to save meaningfully (outside their pension) while they still have enough years to run til retirement to make S&S sensible. And I'd still be wondering why they don't just top up their pension in that case
There are lots of younger people opting out of their pensions as a) money is tight with rents, student loans etc b) they can't see themselves ever retiring anyway c) wanting to save for deposit instead. It's massively short-sighted, yes, but I can understand it too.
You have to have money to invest. After years of austerity who has? WOuld you invest in renewable energy if Reform will deincentivise it? Would you invest in Fossil fuels? Armaments seems a safe bet.
If we wanted risk we could go to the casino.
Funds (active or index funds) are designed for people (like me) that don't understand the stock market.
Saw many comments about the Cash ISA allowance reduction idea saying "stock market bad place to invest because it lost 10% last week and wiped out my retirement savings". Forgetting that the stocks may have risen 50% in the 5-10 years you owned them.
I am sure someone has mentioned it (I did look but there are a lot of comments) but anyone who has an occupational pension will potentially have a reasonable equity exposure.
A big problem is that people don’t see cash as a risk asset. In reality, last ten years, inflation etc the value of a lot of people’s cash holdings will have declined. Yet it’s investing seen as risky!
Trouble is most people probably don't have a clue about investing, (neither do I, I don't even know if that's the right word), but they're going so forcefully on this they're apparently planning a 'Tell Sid' style campaign (for those who remember it). That will up support. I just can't believe a...
... Labour government thinks this is the way to go.
Wish had more detail on these answers- essentially the target for policy should be anyone who answered “no” who has savings that aren’t a) for a fixed nominal sum b) as unemployment insurance c) some other imminent need.
I think all cash *savings* products should have big health warnings that are on par with the “your investments may go down as well as up” on investments. Something along the lines of “You are highly likely to lose value over time in this product due to inflation” or some other words.
Are we counting gilts as stocks or cash for this purpose? 30yr gilts are getting very attractive as a place to park savings.
Obviously keeping all your money in a standard high street savings account is a bad idea unless you need, or might need, access to it.
That's the thing about these discussions - isn't "you need, or might need, access to it" true for most people's savings most of the time?
Per the poll it is only true of a third of respondents!
Per the poll. That's your answer. By the time this question comes around you just want the thing be over. "Stocks are for yuppies/ c****/people with more time/money to waste" isn't an option. You just want to finish asap and collect the points. The first one. "Too risky". Yea, that'll do. Next.
And also we can…see and observe what people do with savings in the UK. (Cash ISAs and amateur landlords, in the main.)
I wonder if that poll was targeted at individuals who have these mythical pots of money lying around in bank accounts or at those of us with barely a penny spare at the end of the month?
Yes, I'm starting to realise that this whole 'tracker' vs. 'savings account' debate is something I don't really need to worry myself about, certainly at the moment 😁
Only people I know who do are recently retired with lump sums sitting in their accounts. One friend has invested in a hogshead of whisky
That's interesting... people will always want alcohol 🙂
Exactly. Important to remember that the average savings for age 45 – 54 in the UK is now £13,318. That's the sort of figure that you *always* need accessible.
I mentioned that age range because I feel like that's a point when having some expectation of saving is fair. Up to age 35, perhaps not, thanks to the housing crisis.
Yes and to the extent it is that makes sense. But if you haven £20k a year to stick in an ISA then that probably doesn't apply....
Most people done have that kind of money. Nor do they have anyone telling them simple good advice of what to do with money. “Your dad” might have that money eventually if by most folks measure they have done “really well for themselve” but the bulk…nope. A months wages or 3 is the goal.
You can get instant access ISAs. And as you know, £20k is the maximum per annum, they should be the default for any saver to be honest. Financial education is simply woeful in the UK. I
I know but that doesn't invalidate what I said! We're discussing cash vs other options.
Yes, my challenge is the widespread public assumption that ISAs are for other people with money to "invest" (meaning something, active, scary and risky), when for even modest savers getting a low, risk-free return, an ISA is a low, risk free return that is at least tax free.
Agree everyone with any savings should have one.
Solution, for Reeves, is to abolished Cash ISA, raise the Interest Allowance to £1,200pa & leave only tax-emption on Shares ISA to promote equity investing.
Potentially overly simplified and you know it, but people without much will get better returns elsewhere and are unlikely to be taxed by enough.
Even then, you can sell funds pretty quickly and funds don't have to mean equities. Plenty of money market and ultrashort bond funds will return more than a high street cash account with minimal price risk.
Yeah though huge price risk there
But you're still locking in an interest rate a lot higher than savings are likely to be. Unless inflation goes boom ofc.
If the interest rate on the gilt is higher than anticipated base rate growth, there's some market mispricing going on? Not all savings accounts offer the base rate. My bank doesn't, but it offers a liquidity fund in a stocks and shares ISA which does, which I'd very much consider cash exposure.
And if you wait to maturity they're as close to risk free as you'll get. If interest rate risk does bother you, but shorter dated gilts - particularly low coupon ones as there's no CGT on gilts.
Yep.
Nothing to make you feel old like realising holding 30 year gilts to maturity isn't going to work. Smh.
Locking in a fixed interest rate versus inflation linked liabilities (spending). Still think a diversified equity portfolio is lower risk.
Index-linked gilt?
I mean, I’m with you given that I’m 55 and still hold c.80% of my public assets in equities…
If you’re holding to maturity, locking in circa 5% for 30 years doesn’t look bad (unless inflation go boom as you point out): you’re essentially buying an annuity.
Yeah if it’s hold to maturity it looks pretty good.
Probably a no brainer. If we're in *end of UK civilization as we know it* territory we're all screwed anyway.
It’s also pretty good if interest rates go down.
This is my thinking.
Not financial advice etc but a lot of people who held all equity portfolios through ZIRP should probably transition to 60-40 now bonds have value again.
QUITE
Ignoring inflation going boom, The downside scenario is you make 5.5% a year. The upside scenario is rates go back down to 3% and at the same time you get to buy stocks cheaper in a big risk off move. You might make 40% on the duration and then buy stocks cheaper in a fortunate outcome.
If you’re capable of pricing duration accurately you’re far more financially sophisticated than 98% of the adult population.
99.9%
Do you have specific funds in mind for that?
Public investment literacy is so low that of those who hv some clue, the American term "stocks" for common stock equivalent to shares probably has them thinking stocks are shares. U shouldn't think of Gilts as cash - the longer dated the more you're betting on inflation. Short stuff say <2yrs ~yes.
Do think it is a fascinating indicator of both collapse in trust in financial institutions in the long tail of the 2008 crisis and also of collapse in financial knowledge/literacy in said long tail.
Also I know this is going to be a minority, but I would be interested to see how being subject to one of the really restrictive savings caps for a while affects people's views/attitudes here.
(I say this as someone who should be better and better informed about this stuff but "to understand a man look at what was happening in the world when he was 20" and all that. Plus I once nearly went over a savings cap by being too depressed to really spend much money for a year)
There are ad campaigns encouraging risky investments. I've yet to see any for a nice safe tracker.
That's actually a good thing - the management fees for e.g. Vanguard index funds are wafer-thin, meaning no money for adverts in the tube but, more importantly, less profit for "fat cat bankers" (for those who see bankers that way) and more money in your pocket!
Idle thought: is unwillingness to invest in shares a hangover of buy-to-let having been seen as a better investment (and possibly easier to understand / feel you have control) in which case maybe things are going to swing back to equities as that unwinds.
Working in the industry we would run into people with 2/3 buy to lets who would consider themselves not to be wealthy enough to invest…
because "an investor" is someone with millions or billions to spend who wears a suit and works in an office...
Good hypothesis, certainly possible.
But if people were rational they wouldn’t invest in equities or BTL, they’d buy gilts Also “equities” in the government’s eyes is “UK equities” and the British investors do invest in some equities - non-UK ones”
The other issue is that media loves reporting crashes (bleeds/leads) Reporting on how the market rose say 10pc in a year doesn't sell ads. So anyone not engaged thinks its much more risky than it is.
I think there's some truth to that.
My pension took a hell of beating from late January due to Trump. Fully recovered now, as has the market.
The market recovered a while back from the Trump tarrif crash. Outside the FT it won't have made headlines.
The ability to cancel a plan and pivot is worth something!
I suspect it's just people - subconsciously, maybe - thinking about the worst case scenario. With stocks you could theoretically lose pretty much everything, however unlikely that is; with BTL, well, you've still got a house whatever happens. The only way to combat this...
...would be to give actual information about the probabilities of your invested money going down by each X percent. We get warnings that you might lose money - but how likely is it? How likely are you to lose more than, say, 20%? Most people's guesses would probably be quite a way off the mark.
And against that you'd have to be quite old to remember mortgage rates being double digit and house prics ever falling seriously.
I think it's simpler - people (okay, I mean me) don't understand it. It's framed (by critics and fans) as gambling, and the jargon is dense. Plus for most people it's small sums - is it worth investing a grand or two? I've no idea.
Maybe people have witnessed the damage certain stock market investment and investors have made (the race for more profits and dividends over worker and environmental protection, etc) and would rather not be a part of it.
Also, if you have a pension, you are heavily into stocks & shares (and some bonds etc…)
I mean I can be your case study, I have savings in the low five figures and they're just in a highish interest savings account on Monzo because 1) I have absolutely no idea what else you should do with it 2) I assume any investment means you may lose money instead, which I don't want
Rule of thumb: if it's your only emergency money, or it's for a house deposit or something you need cash for soon, that's one thing. If it's for your retirement or something more than, say, five years away, it's worth your while to spend less than an hour of your time at least googling index funds.
give it to me
not, to be clear, an offfer to invest it for you. I want to spend it. for myself
I can see my pension balance on my internet banking because it’s the same parent company, and seeing it crash by nearly £10k because of all the stupid shit happening in America was enough to put me off any kind of stock investing thank you
How is it now
still volatile, thanks for asking
📌
If you are saving long term, expect to double your savings rate on average investing in low risk index funds. Look up FIRE (Financial Independence, Retire Early) people who are people of modest means taking advantage of the system we already live in, because why not. And yes, you will occasionally
see the balance go down, but on average you’ll be much better off. The main thing is that you don’t put the money you may need at short notice into these vehicles, these are for long term savings (5+ years)
2] is my thoughts exactly, why would i invest in stocks when I've lived through at least two, maybe three global financial 'whoops!' moments in my life?
This article by Angry Socialist Blogger Hamilton Nolan is a pretty good overview for the skeptical web.archive.org/web/20191010...
Exact same case here. The idea of loosing some of what we have is just not an acceptable outcome.
Stocks and shares isas are brilliant (important caveat: if you have to file taxes elsewhere as well as in the U.K. consult an accountant and absolutely do not set one up if you have to file taxes in the US because you will get a massive bill). But otherwise, they’re great.
The US tax code gets very aggressive with stocks and shares in non-US companies and it’s not covered by the normal tax treaty arrangement so a relatively small investment can cost you lots of money, as well as a huge amount of paperwork.
This sort of (perceived) complexity and unforeseen circumstance is probably part of the reason why many people just stick to straightforward savings account.
Most people aren’t dual nationals, though.
I know... but this sense of consequence and unknowability when it comes to investing (from the layperson's perspective) is not restricted to dual nationality... it's all 'rates' and 'fluctuations' and 'tracking' etc. It's confusing.
I'd also add the caveat that you should probably be in a position where you think the probability of you having to withdraw from the ISA at short notice is low. My ISA which now has more than £4000 profit was at a loss only this March.
Yes, that’s a fair point. You need to be able to have a lower risk savings account elsewhere as well.
Yes, some cash (ideally 3-6 months of take home pay) stashed away in an instant access account for emergencies.
You are a step ahead of me with this Monzo carry on.
join.monzo.com/c/g9ycmqb2
over in Europe, they have products designed for people like you which offer equity upside with downside risk protection. Unfortunately they tend to be priced based on the psychological value to the customer rather than the technical financial model value, so they don't pass consumer fairness tests
Any thoughts on why US retail investors have been much more eager to invest in index funds than UK retail investors?
Equity culture which is the legacy of long term regulation of sports gambling
In the US? (just to be sure I understand the reply)
Reasons: - John Bogle and Vanguard in the 1970s in the US. Great product, great self-marketer, set it up as a client-owned mutual, conveyed a mission. One of the top 3 fund companies globally now. - Also 1980s legal cases on fiduciary duties for managers gave a bigger incentive to consider low-cost
I think those are some, but not all of the reasons. Great Depression killed US equity culture for 50 years. It recovered in late 1980s early 1990s. Vanguard has $ trillions in AUM but so does Fidelity, Capital Research, BlackRock, etc. 36b cases were all won by the asset management industry
some might call this another example of economist brain ignoring commercial reality, ensuring that people end up with inadequate savings but protecting themselves from being blamed. but not me, I like it.
(I should probably write a blog post on this, but basically the intellectual history goes: efficient markets theory -> very strong belief in index funds -> general suspicion of profitable financial products -> some admitted misselling scandals -> ever tighter regulation of products -> ...
... -> everyone involved has economist brain and doesn't understand marketing at all -> the products that have been designed to address people's actual wants and fears aren't very like index funds at all -> financial services marketing withers on the vine as an industry -> here we are now ...
... basically, the only products that you can get to market in the UK are ones that look really unattractive without a lot of advisory hand-holding in the sales process, and British people absolutely.will.not pay money for financial advice. Let's have another government ad campaign!
(the big problem being that although you might think phrases like "the sales process", "consumer wants and fears" and indeed "marketing" would be familiar to economics graduates, the way it's taught today they really aren't. And it's difficult to get a central bank job without an economics degree.
I Vote for to write up that blog
Monzo has 14 pre made funds you can pick from. My rule of thumb is if I need/could need those savings in the next 6 months they stay in savings. If they can sit longer into an investment. My savings get 4%. Investments 16% in the last 3 months.
I've opened stocks & shares ISA twice; once was just before Truss became PM and once was just before Trump announced his tariffs. Lost money on both almost immediately as stock markets crashed and took months to get it back. It's hard for me to think "I should just check back on this in five years"
A Monzo-specific thing: open a stocks & shares ISA and set up "round ups" i.e. whatever change you would get from any transaction gets put in that account. Rather than moving your savings significantly towards investments you'd just have a little investment that grows on its own without risking much
All investments involve risk. Savings accounts are seen as "risk-free", but you still take on risk by a) losing the value of your money to inflation and b) missing out on the opportunity cost of investing. The S&P has an average ~10% growth rate in its history. Isn't it a risk to miss out on that?
I don't know what "the S&P" is lol
US equity index. The key point here is that it entirely depends on what the money is for. If it’s a separate nest egg for retirement then absolutely stick it in equities. If however it’s an if stuff goes wrong reserve then keep it in cash.
In that regard I think what can be helpful is to split your savings into multiple pots and have both cash and stocks savings. But I get people don't always want the hassle of managing things in that way
Technology has made it almost hassle free, monthly automated payments and broad passive funds ftw
Absolutely re the different pots
This but also limit the size of the cash pot to maybe a month or two of income (if you’re in a job). I think people massively overestimate their need for *instant* access to cash.
yeah it's a mix of the latter + money for if I end up eventually getting knocked up (inshallah!) while still self employed, as there's basically no mat pay for people not in jobs, so I guess I should prob keep it close at hand?
We can talk about if pff main if you like. And while it’s true that you lose a little money via inflation etc if you think you might need the money in the reasonably short term then equities are less attractive because of higher volatility (ie risk of going down).
also I guess it depends how you define risk - I'm not necessarily entirely wedded to my way of things but I won't lose any cold hard cash right now, and that inherently feels more low risk than maybe getting more money but also maybe getting less
But you literally have. The cold hard cash you have right now is worth less than it was worth a year ago.
yes I know how inflation works but my point is that if I make a bad investment then surely I'll lose more than if I don't invest at all, that's my point about seeing risk differently
I wasn’t trying to explain inflation…. It’s not about choosing a bad investment, you don’t have to stock pick. Just choose literally any tracker fund managed by eg Vanguard and like that’s absolutely fine.
Concentrated risk that then is amplified into the biggest Ponzi schemes through market cap increases - i.e. what will suffer most when the market turns. No one should invest in any asset that has rallied multiple 100% in a short space of time. Just put in bids -50% / -75% etc and wait
Everyone has different risk tolerances, for sure. There's a wide gap between investing in crypto (high risk) versus a speculative growth stock (EV battery maker) versus a blue chip company (Apple) versus an index that pools together 500 of those blue chips (S&P).
Generally the higher the risk, the higher the potential reward. But indexes generally provide stable growth, with the exception of massive downturns (recessions, god forbid a depression). Even so, historically if you haven't sold during those times, the markets have recovered over the long term.
Am I right in saying that there has never been a 20 year period where markets have ended lower than they started? That might be specific to the US. Not sure.
While this is technically true, the answer is to invest in a globally diversified index fund. If *those* end up as "bad investments" that don't recover in time for retirement, the entire world has imploded and savings of any kind would be the least of our concerns.
You'd be surprised how quickly a small bit of money a month into a S&S ISA has enough growth that you'd need a really massive drop to lose more than the growth. And try not to "invest". Use nutmeg or a service where you can specify risk level and they invest in tracker funds for you.
If you want a simple recipe. 1. Build Savings like you have ✔️ 2. Open an account with Degiro or similar. 3. Every month buys some ETF like “FTSE All-World”. Even small amounts but keep doing it. Repeat. Bonus points start a pension. That’s it.
If you’re buying in regularly and your investment goes down 30%, keep buying. You own the shares/etfs you’ve bought. If they drop in value you still own them you haven’t lost a penny. You gain or lose when you sell.
A 30% drop in share prices to a young person is a thing of joy. It means you’re buying at a discount. “30% off at the stock market”. Who doesn’t love a sale!
Especially since the same people pushing into investments "now" after a 16 year 700% rally in the S&P 500 were warning of dangers back then. It is the "definition" of a Ponzi scheme right now, and good for people to see it. Of course, I am not saying one should not buy when the market drops 90%
It mostly matters in terms of time horizon - if you only want to save for a couple years then use it, carry on doing what you’re doing. If you’re saving long term, odds are you will end up with less if you keep it in cash.
But I think the time horizon is the part that most people struggle with? They/we know what inflation is, but there’s a whole big murky space between “I need to buy a car next year” and “retirement” they’re trying to plan for.
Basically all of the financial advice you get as a young adult is ‘how to save for a house deposit’ so not really a surprise that people flounder with other savings.
I tell people to set up multiple train tracks. One is for your pension. Set it up and pay in. Job done. Separate to that is saving for maybe I’ll buy a house or car. Don’t try to think short term and long term at the same time.
That’s definitely true and remember having the same issue when I was younger - being asked “what do you want to do with this money? When do you anticipate you’ll need it? And just being like, I have absolutely no clue.
Having a pension is investing in stocks and shares, isn't it?
Yes, but per all the research done around 2012, most people don’t realise that. Previously was one of the biggest contributors to ceasing contributions when they found out. Also vast majority of uk pension savers are totally inert.
Sure you already know, but there's different funds with differing risks. My bank S&S ISA offers a range, with their "low risk" fund being 75% bonds/cash and 25% shares. You can mix funds in their ISA too, so you can have £1000 on high risk and £2000 on low-risk.
I'm not qualified to give financial advice but general sentiment is it's good to keep some cash set aside (~6-12 mos) for emergencies and invest the rest depending on your risk tolerance. But the point @stephenkb.bsky.social is alluding to is without investing, you are likely to end up worse off.
You could lose cold hard Euros by having your savings in Sterling (or vice versa). [There's no way to fully protect against that risk - you can technically hedge it, but you'd need seven digits of savings for that to be legal and eight digits for it to make sense].
This was my view for ages too then I realised that 1. I kept getting stuck in old interest accounts that were effectively losing money and 2. Even 4% interest when inflation is 5-10% I was losing money
I slowly started moving money into S&S ISA's and quite quickly you've made enough growth to weather even quite big drops (and every time I did a big move it dropped - I time terribly - but recovered) I try view "normal high interest" for emergency cash and all ISA's are now S&S for longer term.
Don’t worry too much about inflation, S&P or any other terminology. Everyone has different attitudes to risk and many have an “I have other shit to think about” attitude. That’s fine. Don’t let anyone tell you your attitude to risk is wrong. When you’re ready it is less hassle than you think.
The only thing I can PROMISE is that you don’t need to become an expert on ANYTHING finance related to put yourself in a much better situation long term. You may find that if you do take steps in that direction you naturally get more interested in it. You’ll be boring people before you know it.
Shorthand for the S&P 500 - an index of the top 500 companies listed on US stock exchanges. It's updated regularly so that better-performing companies are included and worse-performers drop out. Essentially takes a lot of the guesswork out of investing for people that don't want to stock pick.
Meanwhile, in blighty. If you're not going to convince ~50% folks to take on FX risk (you're not), then? UK perceptions around investment risk, loss aversion are a problem - but it is true and shit that S&P is the outlier at one end, and UK stocks/equities at the other. (Which is linked ofc 😅)
Even in the UK, even in our lost two decades, a stocks and shares ISA has outperformed cash.
I mean imagine if it didn't? 😅 Just pushing back a bit on the default opportunity costs for UK savers being in the order of 10% a year S&P - it's v real, but not quite that for anyone much under 45.
The 10% average is totally a shorthand, and that's a historical average over the past ~100 years (and assumes relative stability in the US market/leadership, which, well...) But if you want to reduce risk further you could split between US equities and international, etc.
I appreciate you're selling the long view here - and acknowledging 'past performance, future returns' etc 😊🙏 I'm just saying for an average person who read the same 100 year stat in 2000, and sensibly invested in a nice high street available index - he 'you're an idiot not to' factor is 🇺🇸>🇬🇧.
Brits can invest in the US market, so I don't see the issue. Though what with Trump tariff nonsense, US equities have definitely become riskier and generally more volatile in the past 6 months.
People who arent financially engaged want 2 save in something simple and close. For UK, S&P a complexity too far. It's one of the reasons S&P is so successful - a massive pool of Americans doing the default! Trying to shift UK saving norms via the opportunities of US return is a tough route (imo).
I believe you only get £85k back if the savings outfit goes bust, too. Small risk, perhaps, but those who lived through the 2008 crisis will remember how real and in our faces that risk became. And a chancellor siding with those in the financial sector seeking deregulation makes my hands go clammy.
I've done very well ethically investing in Green bonds, through Abundance, and Fidelity's GIA.
Yes, there are vast numbers of funds to choose from and you pick the risk profile you want. Great for cautious or newby investors.
But having said that, I moved my cash ISA savings to a Stocks and Shares ISA a few years ago, and I definitely do not regret it. It has done a lot better than any savings account - and the gains are tax free. The essential thing, of course, is to get good independent advice when you start out.
it's 85k if the money is held as *savings* as a bank deposit in cash ISAs - if your money is in stocks and shares, your *investment* is segregated/ringfenced so it's not affected if your bank crashes.
Agreed, my sincere apologies if I gave that impression!
No worries, and sorry if I gave the impression of "correcting" you, which wasn't intended at all.
Not at all, it's a very valid point to make.
I hear what people are saying about this and they're probably right, but I think a lot of people find ANY financial risk a source of anxiety? I just looked at the five-year performance on the stocks ISA my bank offers and they all took such a hit in 2022 I'd have been stressed to fuck by it.
Yeh I’ve not idea what I’m doing and, especially with a massive personal expense myself and my partner have done, I’d be terrified of risking the little we have left. Not that long ago where the rent was a worry like.
I simply don’t trust fund managers. I’ve been through 3 recessions. I accept I have to trust my two pension providers to invest on my behalf, and both have a derisk period as they approach maturity. But that’s as much risk as I’m willing to take.
The cultural issue is that housing is the most dependable investment but is increasingly beyond reach. If most of your income goes on having a home, you’re not going to invest in something like shares whose value may fall as well as rise. Cash feels safer.
Obviously, property values can go down as well as up. When I bought in 1996 it was in a slump so I got a two bed house for a £3K cash deposit and paid less than the seller had for it. I suspect that same £3K put into stocks would not have returned roughly £100K over 28 years, given market crashes.
And there’s a class dimension. If you look at the social grade demographic in the full results, you can fear of the risk is significantly higher in C2DE. No amount of middle class “but it’s *fine* can override a fear or precarity. ygo-assets-websites-editorial-emea.yougov.net/documents/In...
The thing is, the “fear of precarity” is not the problem here! Those people are right to save in cash! The problem is that British middle class people save in a less sensible way than the American working classes do.
It’s a worthwhile thing to get young people sensibly knowledgable about. My savings life transformed once I siphoned a chunk off to investments. There obviously have been big dips. But it’s an amount I don’t need imminently, so can afford high risk funds.
Which will be for a range of issues, including how it is reported* and the lack of financial education. *I frequently despair of hearing “the markets” on the news as if they are strange godlike forces. It’s alien.
Also on the news - layoffs etc in various industries to boost shareholder value. Not terribly keen to grab a slice of that action tbh.
I wrote a short story about this very thing last year!
Those child trust funds the Blair government did should have been 100% equity-only. Spending the first 18 years of your life watching a basket of equities would teach you a lot.
Yeah, agree. In an ideal world would bring those back and part of the curriculum ask would be 'at 18, school leavers are equipped to make useful decisions about their nest egg'.
I was surprised to see my bank doesn't appear to offer any kind of mixed ISA, and it strikes me if you want to encourage people to invest, that would be an easy way to do it? Let you adjust how much of your savings you want to put in stocks and shares.
I mean you can just have... 2 ISAs?
If you don't trust fund managers (you're right not to - none of them justify their fees by outperforming the overall market over the long term), you can take them out of the equation by investing in index funds/ETFs.
I think this, combined with people's general lack of savings, is probably the reason - "I haven't got that much money, I might need it and there's a chance it won't be there" sounds like a powerful deterrent. Plus, recent headlines about the stock market probably don't help.
yeah that's where I stand too I think!
The minimum period to consider investment for is five years, 10+ is much better. Ideally you want to drip feed money in so you are more insulated from and can even make the most of dips (pound cost averaging) and then NOT look at it (assuming you use an index tracker). Best of all get real advice
A good financial advisor is like a good accountant, they earn you much more than what they charge (and free advice off people on the socials is worth what you pay for it)
since I have a mail from my IFA to hand, here's the last 3.5 years in a FTSE tracker (pink) versus the funds my IFA manages for me (red): cumulative performance is 28-29% for both over 3 years, 21-22% over 3.5 years and 51% for the FTSE tracker over 5 years (managed fund hasn't run that long
but if you look over different periods, you see the impact of a market slump; over 3 months it's 7.7/10.9%, over 6 months it's only 0.67/6.94% - v poor return from the FTSE and you can see the advantage of a managed fund.
on the chart you can see a number of times when the returns are negative - but they recover and over the long term returns remain high
the discrete performance - how it does within a single year rather than since the beginning of the investment - is smaller numbers: 4.7/8.4% in the first year, 13/12% 2nd year, 8.9/5.9% 3rd year, -2%, 20% -11% years 4, 5,6
My first financial advisor started cracking a joke after the 2008 crash; remember, the value of shares can fall as well as plummet!
But again, getting a financial advisor (or an accountant) feels like it something *other people* do.
It feels like something that costs money, and we're only having this discussion because we don't have enough in the first place
financial advisors don't (usually) charge you money up front; they make a small ongoing charge (maybe 1.75% compared to the 0.9% a pension fund charges or the 0.4% a stocks and shares ISA charges, so they all cream a little off). that reduces your return slightly rather than you handing over cash
but then you also have to find a reputable financial advisor. And not feel ridiculous going to them.
changing that view would be the best way of making investment more accessible to people; it should be right up there with starting a pension (I have an accountant because I have a company, most people won't need that as much)
The thing is: in the long run, cash is actually the worst investment possible. You don't have the yo-yo thing but you also (a) barely follow inflation (b) every ~100 years a country just fucks its currency up and if you're holding cash you're left with nothing. Long term, stocks are...safest.
It usually depends on your timeline for using the money invested: "not going to touch it for five years or more" is reasonable for a stocks & shares isa but usual advice is to keep 6 months costs in cash before you think about that.
They have recovered, but the "low-risk" one has ended up paying more or less what their cash ISA does over the five years.
The fun thing about our modern world is that we now seem to fairly regularly have massive shocks to the financial system which mean you can be quite unfortunate with anything stocks related, another slightly offputting reality
Risk is correlated with reward. The issue is if you hold a diversified portfolio for long enough the chances of loss are very low indeed.
This thread is moderately depressing as it hammers home the gloomy reality of my pecuniary situation, which is essentially the same as when I was about fifteen. No mortgage, no savings, no investments, nada. I will therefore wish you all well and look ahead to the first drink of the day.
The standard advice that I got when I started working was: Make as big a pension contribution as you can afford up to the maximum that is tax-advantaged.
lmao I don't have a pension
Yeah, I long for the days when my lack of one was a major worry. Or a worry at all.
You’re far from alone in that. You’re also most DEFINITELY far from too old to start. If you’re self employed like a lot of journalists are, it might make even more sense. Plus think of the columns you could write about the whole experience.
Put three months post-tax income in a savings account; if you're self-employed or freelance, make that six months. Do not do any other investments (except the pension) until you have that; if you have to dip into it, stop adding money to investments until you have refilled.
Put the rest of your investments in some sort of long-term diversified stocks and shares fund with the best tax advantages you can (this is currently called a "stocks and shares ISA"). You need to be able to forget about the money in there for years. Only look at this every 3-5 years.
Note: if you put money in the day before the 2008 crash, you'd still be up today by more than putting the same money in a savings account - and that's after investing on literally the worst possible day in the 21st century.
r/ukpersonalfinance 👍
If it helps, the official policy stance of the FCA was, more or less, designed to make you feel this way
open a stocks and shares isa, buy ftse 100 etf, keep dripping money in , yes you may lose money short term but over long term if you keep dripping money in should beat bank interest/inflation
1) You should invest it in something that returns more than a high interest acct. That usually means equities 2) If you invest in 1 equity (e.g. M&S, or BP), then you only lose (all) the money if that company goes bust. If you invest in a portfolio, you only lose (all) the money if they all go bust
There is a well-known and well-evidenced phenomenon by which people take too little risk, and therefore have too little return Basically when you're young, take risk because the higher return pays off over time. When you're older, take less risk because there is less time available to regain losses
The basic version I've heard a lot of variants on is: the further away the purpose of the saving (house, retirement, etc) the less should be in cash To minimise risk, diversify, which for a non expert means find a tracker fund with low fees But yes, can go down as well as up, just look at April
You have access to so many people that would love to explain this to you. I respect your commitment to refusing to let men enjoy themselves.
:)
Finance bros are THE WORST.
If it’s emergency funds in case you have a low patch work wise or need a deposit, that’s not necessarily a bad thing as you can actually access it
If you invested $10,000 in a total market index fund like Vanguard Total Stock Market Index (VTSAX) in 1994, and held it until 2024, the average annualized return would be approximately: ~9.7% per year
Rule of thirds. 1️⃣One third in the market in a fund like VTSAX 2️⃣One third in a short term high interest CD LADDER that provides liquidity opportunity every Quarter 3️⃣One Third Emergency Cash in the highest interest bank account you can find.
As a minimum, put it in an ISA so you are not paying tax on that interest.
Bunch of good finance youtube channels out there. Also a bunch of terrible ones. Do you want some links?
A lot of people can't afford to lose their stake AND more importantly might need access to it in a hurry.
The people who answered “no” and qualify for a), b) and c) probably fit in a phone box.
(Or are pensioners!)
(That came across snarkier than intended.)
Feel like targeting the 'don't understand' people with 'let me tell you about tracker funds' is the easiest win here?
Yeah, agree. I didn’t think the proposal to drop the limit was a good one and they are right to have dropped it IMO. It is a public info problem (and also a regulatory one about how we provide financial advice).
Possible hot take but I think at least some of public opinion, particularly after the GFC/'08 associated stocks & shares ISAs Vs Cash as "why would I pay management fees to rich people in the city playing casino" The existence of very low cost ETF trackers without active management hasn't filtered
Passive management sounds utterly counterintuitive. Pay less and have a 90pc chance of getting more...?
Make it clickbait "here's the secret bankers don't want you to know" "one weird trick to beat the bankers"
"Fat Cats hate this one trick..."
I mean, it would make the policy question much simpler if people didn't need an ISA as a substitute for unemployment insurance in the first place, as is the case in most other European countries!
Indeed. UK message to households is basically “if you’re laid off, you’re on your own, but when you retire, we’ll provide you something”. Unsurprisingly this leads to sub-optimal use of savings.
The previous message was you're on your own but when you retire you will get something *and it will be enough*. At least they're being honest about that now... too late for my generation...
Higher earnings-linked UI would be expensive and less redistributive than the existing flat-rate system arguably (screenshot from the IFS's report on the future of the State Pension):
Let's not get ahead of ourselves, no one said anything about an earnings link! At the moment unemployment insurance *does not even exist* in the UK. The closest we get is 'new style' JSA, but that only lasts half a year (and is only worth £2393.30 in total) and you have to sign on at a job centre!
What I'm arguing is that if we had a flat-rate contributory unemployment insurance system, akin to the state pension – at a decent rate, that lasted perhaps a year or a year and a half – you would get a much better allocation of savings. It wouldn't be redistributory but that wouldn't be the point.
I think if we were in the 2000s that might be something to contemplate, but in the current fiscal climate it feels like it wouldn't even fit onto the 'nice to have' list.
It's a bit like discussions about UBI, which I have a certain philosophical sympathy for, but which feel like thought experiments rather than realistic scenarios for the future of the welfare state.
It's entirely realistic.
I hugely respect your passion for this subject and the intellectual rigour you show in evaluating UBIs, but I'm afraid I still don't see how one could be implemented without placing significant pressure on other critical areas of public spending, or without harming particular classes of claimant.
Most UBI models I've encountered work well for about 60 - 75% of people, but there are minority groups - notably those with disabilities - where the UBI model is a relatively weak fit.
To reiterate, I don't disagree in principle, but we're a long way off this being practical: bsky.app/profile/nath...
Unemployment insurance exists in loads of countries through, and has done for decades! It's not an abstract idea at all! It would be to everyone's benefit if you did the absolute minimum amount of research before commenting.
I lived and worked in a country that has a Ghent-system unemployment insurance model, and it has advantages (and disadvantages) that I'm fully aware of.
I'm also very conscious that trying to transpose a model that developed under and is sustained by, very different labour market conditions to the UK's, is unlikely to succeed without a lot of effort and resources that could have greater benefit elsewhere.
Were I to respond seriously I'd say that you could institute a separate levy at a pretty low rate for this, that countries significantly poorer than the UK already do, and that you'd save workers money in the medium term. But your mindset is so cynical and defeatist that I might as well not bother.
It's not 'cheems' or defeatist to point out that spending relatively scarce public resources on a state-backed insurance scheme that would predominantly benefit middle and upper-middle class workers, isn't the optimal fiscal policy when things like the benefit cap and the two-child limit exist.
As I've tried to make clear, I'm not opposed to the idea in principle, I just think now is not the best time to be funnelling public funds in its direction.
It would just be far more efficient to have a collectivised system of unemployment insurance than to carry on with a situation whereby everyone on middle incomes is obliged to hold c.£10k in cash savings lest they lose their job.
I'm actually surprised that the Old Labour Right hasn't latched on to contributory unemployment insurance as a policy idea yet, given it aligns so well with their ideological priors (i.e. something for something, deserving over undeserving, etc.)
There was a Fabian Society paper sometime in the last year or so, but it didn't get any traction
It also proposed a state run one, whilst one of my own more Old Right-ish reasons for supporting it is to use the Ghent model to increase union density
That's a fair point, and that might actually make it an easier sell politically – in the same way that auto-enrolment was an easier sell than mandating workplace pension contributions
I know, I read it!
Sorry
You and I are among the few Labour members obsessed enough to have read such a thing lol. Idk about you but I find our party's general disinterest in welfare policy very frustrating. Initiatives like the Commission on Social Justice are remarkably rare exceptions to that norm.
It's part of the proposal for out-of-work disability benefits in the White Paper.
Liz Kendall's not in the old Labour right!
(Tho to be fair, Shabana definitely is and is pro-contributory principle too.)
Ah, my MP (technically, based on my last English address)...
I think we should be trying to bring in a Ghent model as a Trojan horse for quasi-mandatory union membership while getting it past the public as right-coded benefits cuts ngl
But I guess it's a sign of how moribund the 'new' right has become that people struggle to tell the difference. And in Kendall's case, the fact McSweeney ran her leadership campaign doesn't help.
And am I right in thinking Kendall's proposal is some weird thing where you have to pay it back like a student loan?
Not that I recall - it's just a consultation about the idea and mechanism, and AIUI it's a real one rather than a 'building a case for a thing we already want' one.
This is what I was thinking of – one of her current advisers proposed a loan-style scheme back in 2013 www.newstatesman.com/politics/201...
I don't remember reading that in the White Paper, but it sadly wouldn't surprise me to see some aspect of the Active Labour Market Policy stuff being like that
I wonder if there's an amount that is a tipping point, above which people are more willing? Average UK savings are about £10,000. 1 in 4 have less than £1,000. Which box have they ticked? I bet a lot of us assume stocks & shares are not for those kinds of sums. www.raisin.co.uk/newsroom/bet...
Okay, so - there is a portion of the population (I am one) for whom this stuff just doesn't go in. I don't understand any of it, it's all unreal and the idea of having to learn about it makes me tear up. It's just this stuff, I can figure out, like, tax and mortgages.
That's downstream of poor maths teaching that means people are not as numerically confident as they could be, there's nothing in-born in Britons that makes us less able to grip this stuff than Americans or Canadians.
I don't think it's really to do with maths. Can only speak for myself, but I can do maths. For me at least it's about grasping financial structures which don't stick in my brain at all. I presume I'm not alone.
It's something I've been meaning to get around to but my working assumption is that if I give my money to yer average British stockbroker they will promptly spend it on cocaine
Look at low cost passive index trackers. The fees aren't high enough for anyone involved to develop any sort of cocaine habit.
I want to meet the 59% who do understand the stock market.
Media coverage of equities tends towards the 'casino' aspect, and never mentions dividends. This is a shame.
The thing is... who has savings over and above the rainy day 6 months worth they advise you to have, and their pension? I never did until R was approaching the end of her undergraduate course and my mortgage got close to being paid off. 1/
My wife does have money from the sale of her mother's house but as she's an American citizen she can't just invest in stocks & shares based investments as the IRS reporting is punitively complicated (you pretty much have to report every transaction a fund does to them!)
And now I do (well, I did but, new roof)... but I can't think in terms of 10 years. Or even 5. So investing in stocks and shares other than through my pension is just not on. I might increase my pension payments now that I can but that's it and it will be, I suspect a short term thing. 2/2
Like, if I put cash in the bank then I have capital, I can do things, I can address immediate concerns. If I invest it then I have to wait ten years for there to be significant growth and in the meantime I can't touch the money...
Ten years is a very pessimistic time frame. Look at low cost index trackers in an ISA, drip feed into it on a regular basis, try not to touch it but if you need to access it, then access it.
I don’t think I could even survive 6 months and I have more savings than almost all of my friends.
Same and same (if you include pension pots otherwise probably not anymore but I do have a nice new roof).
Your comments are really helpful & interesting. I'm definitely somebody who would fall into the "feeling ignorant & frightened of stock market + worried about how ethical some of Investments might be so just avoid the whole thing" bracket. It doesn't feel as tho there is anywhere to get good advice
It certainly doesn't help that we hear "if you own X-company stock then you're personally responsible for whatever vicious bullshit X-company does..."
I recently set up a child’s Wealthify Stocks & Shares ISA for my toddler. Lots of different options depending on the level of risk you want to take, and have ethical investing options too
That's really helpful to hear, I'm definitely in the category of "unconscious incompetence" where I don't even know what I don't know or where to begin! I lost a lot of money in the 2008 crash that was supposed to be in safe stocks and shares and I've just stayed away from it since.
We just signed up and deposited money. They charge a tiny % fee, but do everything, so we can just leave it and come back when she reaches 18
Rebel Finance School is really good...free, on YouTube, and they have a Facebook group as well. They tackle all aspects of finance starting from eliminating debt and building a gap, all the way to how to understand investment fact sheets and platforms and how to invest/how it works. Really rate them
Thank you, this is really helpful. It's one of those things where there seems to be so much advice out there and I don't know who is reliable or what might be a dodgy scam so have not even known where to begin. Really appreciate your tip and you taking the time
You're welcome. I find the yt videos a bit long and a bit boring sometimes but the actual content is useful imo.
That's really a helpful comment thank you. I think I am definitely responsible here too, I think I need to put the work in to find out about this stuff but day-to-day life is always so busy that I don't & I haven't even known where to begin. You've given me a good place to start so thank you!
It'd also be interesting to see how this correlates to household debt, given how high this is in the UK (even excluding mortgages).
We would put our money in the Royal Great British Trust available through post office books.
You would want to know who out of those surveyed actually have savings / are in debt.
You're never going to be entirely rid of the people who think that cash = money and that burying jars of coins in the backyard represents "savings".
Maybe, just maybe, because the City has repeatedly behaved like a bunch of spivs. Paying themselves extraordinary amounts from the fees they charge. Having seen the City close up for many decades
Ah yes, and their American counterparts are all humble, honest joes that have done so much to earn the trust of the American public…
There’s a lot of interbreeding there!
It is good advice for those at a particular point in their lives. If you have an adequate income, can afford more risk in your portfolio and have time on your side to recover losses, then fine, you may well build your capital by investing. Not great advice if you live off limited capital though.
I wonder if question wording has distorted the answers: "invest your savings" sounds very all or nothing. I have feeling that "invest some of" or "invest any of" might have attracted different answers?
I don’t know that that’s the reason tho. For me it’s all about the risk and lack of knowledge and understanding on how to protect myself in a riskier context
Same. I’m retired, have a savings account and an ISA (which deceased husband set up) but no clue/less understanding of finance. Just happy I live comfortably on my pensions.
Most of their money in savings accounts is invested in markets by the institutions holding the savings. The difference is the institutions make money, not the individuals.
For those of us who lack financial literacy but are willing to learn, where would you advise starting? I'm largely held back by my incapacity to separate bad/malicious advice from good advice
It's telling that, after 5 hours, no-one has answered this perfectly reasonable question. For money info in general I recommend Martin Lewis (there's a mailing list). Beware of imitations. For stocks and shares, prob the best way is to know someone already in the business!
Strongly recommend monevator.com. Although they do talk about active investment for the interested/expert, the strong message for us average Joes is ISAs, pensions and index funds. Lots of useful info on what is available, and how .to invest. Check it out
I will never understand how people can be terrified of fairly basic relatively risk free investment but not terrified of their savings value being wiped out by inflation.
It’s I think a product of a number of British problems (coyness about money, bad mathematical and financial literacy education). Note how the people getting angry in my mentions are a cross-section of Brits while a bunch of Yanks are just rting or liking the post!
The irony that we actually have enormously generous tax breaks for investing…
Confidence. Or not.
Just get every school kid to read Warren Buffet. And I’m not even joking.
I think "terrified" is overdoing it, as is "wiped out". We're not talking Weimar Germany / Zimbabwe; I doubt many British people have had their savings wiped out by inflation in living memory. The interest, maybe. But that's the difference, isn't it. With investing, people worry about losing the lot
"relatively risk free" = all your capital is at risk "wiped out by inflation" = loses some of its value
If I lost all of my money that is put diverse index funds, I don't think the cash guy would be doing so hot either, because that would mean the breakdown of the entire world economy. If you invested in the DJIA at its peak before the 2008 crisis, then lost a ton in the crash, but took it out just
10 years later, you'd have a ~64% return. Meanwhile, inflation in the US in that time period was ~18%. That's a massive swing.
How about the four stock market crashes in the last 38 years.
None of those crashes would negate the performance of dollar/pound cost averaging and progressively transitioning to bonds in later life.
Wouldn't that take a more active approach ?
Technically, but it's a really small amount of work. Many platforms offer the option of setting a schedule of automatic deposits and then purchases of an index fund with a target retirement date that will gradually shift to more holding of bonds.
It's properly depressing. My mum (67-year-old recently retired teacher) refused to invest in anything but cash savings accounts (deeming stocks too risky), and as a result I imagine has lost in real terms ~30% of what she originally saved over her career. Sad to see people repeating that mistake
"Imagine" doing a lot of heavy lifting there.
Okay, perhaps not 30%, but still a significant sum given her peak earning years had such low base rates. £100k in the bank in 2008 earning 2% would end up with £140k in 2025; £140k is the equivalent of £85k in 2008 purchasing power, so a 15% loss just in those 17 years.
Poor financial education is part of it. But consider that young professionals who should be starting to build a portfolio grew up in the shadow of the financial crisis. Theres a distinct and understandable lack of trust. I know I put myself in that pot.
I should be investing more but my cash ISA 'feels' saver. Especially since the worlds largest economy is being run by conspiracy nut jobs
it's not irrational to be afraid of uncertainty
Everybody needs a cash hedge. If all you have is money for 6 - 12 months living expenses the number of stocks you should buy is zero.
But it is irrational to think the alternatives - such as holding cash while inflation erodes it - aren't uncertainty as well. Everything is uncertain! That's life! The good news is that things like S&S ISAs reduce that uncertainty as much as feasible.
Indeed. It is not good that people, including most of the replies I am getting, don’t understand the fundamentals of how this stuff works!
I can excuse not understanding as long as someone is open to learning, but I can't excuse some people (& I've seen this irl as well) having a viscerally emotional reaction to *any* advice on savings. Not sure if they view it as criticism of their lifestyle, or...
it's a visceral emotional reaction to be the expectation that we manage our lives as though they are portfolios. Clearly if there is some "set and forget" s&s option that's best for everyone that should be communicated, but it's not exactly the most dangerous ignorance available just now, is it?
There *is* a "set and forget" S&S option (dollar/pound cost averaging a target retirement index fund that's globally diversified). I don't know why whether it's "the most dangerous ignorance" is relevant at all.
Also, the theory here seems to be to react with visceral hostility to advice on this topic to, what, save openmindedness for bigger issues? Could just…be openminded in general!
these replies are ignoring my point about the emotions involved in being required to treat our lives as portfolios... Anyway, I'm going to look into a s&s isa now since you're so vehement, but for everyone else the only way you're going to achieve change is to get Martin Lewis to talk about it.
Martin doesn’t give investment advice. He’s always very clear about that. What we need is someone equally trustworthy to give investment advice. I can recommend Investment Chronicle (Magazine & website) & their various podcasts.
Your life isn't a portfolio, but your savings are. It's just that some of those portfolios are very low-risk, but make up for that by being extremely low-return. And that is fine for those of us with very few savings where it's there to deal with crises, but a much worse deal for those with more.
So what does 'dollar/pound cost averaging a target retirement index fund that's globally diversified' mean to someone with a spare £500? (Or more basically, what does it mean in lay terms?)
I don't think schools give them much steer on personal finance. Wells Jnr did A-Level economics, which seemed to be 50% personal finance, yet still emerged clueless on it
On that - anyone aged 14+ will have the Child Trust Fund thing maturing when they hit 18 to give them a kickstart on this, so it is actually practical advice shools can give. If they were born in the UK, they will genuinely have a small savings pot coming to them at 18
(Sure many or most will want to spend it on something rather than re-invest, but still, it is a chance to teach something real)
No, they add a second order uncertainty. Stick £500 in an account, you know you'll get £500 + uncertainty back. Invest and you'll get £500 + uncertainty x uncertainty.
But, but Targeted Support I wail from my Ministerial Office
What do they think their pensions are in?
The legacy of 2008 will last two generations. Not much you can do about it except try a new marketing scheme that removes the words "stocks and shares" entirely
Most people who kept their building - soc. privatisation windfalls saw their value fall to nothing, or close to it.
1987,2000,2008,2020. That is 4 stock market crashes in my lifetime. I see it all as a scam unless you are rich.
2008 wiped out entire life savings for some though, including my grandparents (luckily my grandma was too old to follow what was happening and my Dad decided not to explain, but it has definitely affected his financial choices since) .
That sounds very tough 😔 Maybe we should all do what Jennifer Arcuri suggests and invest in gold.
And we should remove those words. Because direct investment in actual stocks and shares is more risk than most individuals should take most of the time.
I don’t disagree, but pensions aside there is currently no product that offers security and growth.
Most people think that this is still what you get from property, though - BTL seems to still be the first thing people think of when they have a windfall and want to 'invest the money in something'
And pensions aren’t really that secure either - before people pile on
This lets the FCA off the hook a bit too much. They spent a decade focusing almost exclusively on risk disclosures, which had the effect of scaring investors away from mutual funds and, with RDR, ensuring no one could get financial advice. Real a perfect combo to break people’s minds
Fair point.
Seriously, if you have any kind of private pension at all it's invested in stocks and shares. How do people not know this?
Auto enrolment/ Nest has been quite a success, and perhaps could be leveraged more in public understanding/discussion
My stocks&shares isa barely performs better than my high interest cash isa - and that only because I've put some money into nvidia a few years ago.
Education is needed, lots of it. For most of the 20th century the govt took care of it, and people didn’t need to see or understand how it worked. When people did get involved, privatisation conditioned them to expect easy profits. And in the 21st century millions don’t trust any govt advice. 🤷♂️
American living in Britain* advice: Don’t bother trying to invest because nobody you can afford to invest with will touch you because of financial reporting requirements. *who isn’t a high net worth individual
Truly one of the few things I think growing up in America prepared me better for than my fellow Brits is investing in your pension (401k). I am always astonished when friends and colleagues in their 30 and 40s are like yeah I should start thinking about that.
It's absolutely enraging, as is the stuff about the supposed insane generosity of the tax break.
What are 'savings'?
People buy into the idea that shares go up and down more than they do the fact long term the stock market almost always goes up. Both are true, but to the risk averse the fear of loss prevails.
I managed my mum's finances when she developed dementia. She had money in a stocks & shares fund described as low risk by . It was badly affected by the turmoil after 2008 & was worth significantly less at the point she needed money for care. I am very wary of stocks& shares as a result!
Exactly. There's increasing potential for similar shocks in the future, not least because of climate change. People's thinking also seems to be affected by the past two decades. But they were marked by rather unusual central bank policies and there's no reason to think current trends will continue.
And I have some shares as the result of building societies becoming banks & which are still hardly worth the paper they were written on! Long memory makes me wary!
Well quite. Recent experience hasn't been any great advertisement for stocks as a store of value. If you're not fussed about ethics you can but tobacco companies for the high yield.
Cancel that advice! They've risen a lot in the last few years.
I am fussed about ethics.
Nobody's got any savings, Stephen, we can't afford to live let alone invest, thanks to successive crooks lile Reeves
I know it's not terrible advice. It's a good idea for people that have small but regular amounts of cash to put it in a tracker for at least 5 years. It's just... I'm mid 40s, and in that time I've had a buffer of 3 months salary saved up once for about 9 months. I now no longer have that buffer.
I've got a stocks and shares ISA. Even with my stated risk-averse approach, it's given me far more in interest than my husband's cash ISA. Took a massive hit during the Truss debacle but has bounced back since.
if having individual UK savers is bad for the economy, regarding crappy GDP metrics, what is it when pretend patriots/execs actually remove money from the UK and stash it in tax havens?🤔
Some of these people genuinely believe that on their retirement they get a bucket with all their past pension payments in and that’ll be enough to keep them going for decades.
No one believes that. No one who is under 40 imagines they will get a pension at all. It will be working until death or assisted suicide.
All the more reason to invest your savings.
I am in the group that has no savings.
Yes, and that’s another ticking timebomb. Given the cost of living, housing, student debt etc, it’s quite privileged to blithely assume people can just “use their savings”.
Yes, fair enough, many people do not have any savings, which is an important but separate issue. But we are talking here about how people that do have savings use them - and in every case they should invest them rather than leave money sitting in a bank and losing value over time.
One in ten UK adults have absolutely no savings at all, a stat that increases considerably among the younger population. Overall, a quarter of the UK adult population have low financial resilience. Talk about your index trackers all you like, but if you can’t save, you can’t invest.
I agree that is very concerning and should be a priority for the government. But what is also true is that the 90% that do have savings should ALL have a stocks and share ISA as where they can increase the value of their savings year on year
Fair point. But there are plenty in their 50s who still believe the State will somehow magically provide. It’s a toxic cocktail.
I think the humidity has got to people’s heads today.
Yep they're unwise. But I'm actually surprised the numbers aren't less hostile. If you'd asked a question such as "The government wants to limit the amount of money you can save tax-free in instant-access cash ISA accounts and make you put it into shares instead" I would guess 75% opposition.
Unwise or anxious? Why assume it’s lack of wisdom rather that knowledge, advice, support and above all confidence? Bit rude.
Didn’t Woody Allen say something like ‘financial advisors invest your money until there is none left?’. This was our experience in the 90s when advised to invest in Japan just before they crashed.
*More* hostile. Doh.
Maybe because the much discussed reduction in cash isa allowance is not actually policy?
And even though she's *said* it's not policy, the Telegraph still try to get away with this nonsense
The Telegraph fired most of its journalists. It is now staffed by libertarians from lobby groups posing as journalists who generate Tufton St aligned ragebait.
Perfect summary. Cf ‘How They Broke Britain’, James O’Brien.
For me if there was a lifetime limit on cash isas but not on share isas I wonder what the balance would be
Counterpoint: had she made that change in April, the 28% of people who would have moved into stocks would have done very well so far from the bounce back from the Trump chaos. A rapid demonstration to the electorate of the merits of the policy
Oh we are unwise? You guys are so patronising. I don't need to take risks with my money and I won't. How would I even begin to assess the risks of any scheme? "Don't trust financiers not to ruin me" became a useful slogan in 2007 and it is still written on my wallet.
It's good that you personally don't need to take risks. But riskfree returns are meagre and unlikely to build the kind of pension many will need. Are you on a DB pension by any chance?
What kind of pensions will be built by those who take the risk and come unstuck?
It’s all about time in the market not timing the market. One should be more aggressive with respect to risk when pension saving as a younger person, then as you get older you should be transitioning to a less risky mix of assets in a portfolio (think moving from stocks more towards bonds)
As a younger person I barely earned enough to pay my rent. Your advice is fine for the well-paid! As a pensioner, my 'full new state pension' suffers a 4-weekly £103 claw-back due to opting out of SERPS (as advised), in return for a princely private pension of £184 (adjusted to 4-weekly).
Literally everyone now has to have a workplace pension, with respect I’m talking about people of my own age now. If you save it in a safer manner now then 30-40 years down the road that’ll make a huge difference! Obviously at your age someone should be an awful lot safer with their investments
I'd guess that a substantial percentage of cash-ISA holders are pensioners.
Yes - I have two DB pensions 😇 which came with lump sums that now live in Cash ISAs.
Lucky you. Alas the rest of us depend on the economy growing.
The problem is the economy might grow - but not one's own investments.
We all already invest in the stock market through pensions!! It's so maddening that no one explains this!
When Lawson introduced PEPs they were about encouraging share ownership. The picture became more complicated when Major introduced TESSAs (tax exempt special savings accounts) which rewarded cash savings. Brown introduced ISAs which combined the two: the rest, as they say,is history.
Na, spiv's charter. The scum who consistently creamed off working people's profits have poisoned the well. I remember the big bang and pension deregulation, I remember paying for the financial crash, your complacency and complicity with Reeves is quite remarkable.
I think it’s the lack of overall awareness/education about investing and I don’t mean uni, just basic societal awareness of what investing does. They teach that in high school in the US, you literally start watching the stock market at 16.
Just saw a tiktok in this, madness. People have convinced themselves a stocks and shares ISA is a form of gambling.
Everyone is terrified of “risk”. Even though it’s clearly better than just losing the spending power of your money year on year. Avoidant culture. Always interesting difference between US and UK
I already do and have done since my early 30s. You get a much better return than in a savings account.
Thing is that almost anyone who has a workplace defined contribution pension >does< invest in the stock market. That they don't realise they do and that they don't understand why this is a good idea is a terrible failure of education.
*for reference that's ~80% of eligible employees
Investing sucks, give me a good pension any day
Pensions are invested?
Your pension is funded by investing, and they always have been! Your post reads “Investing sucks, give me good investing any day”.
It’s obviously different than having to have a personal portfolio. There’s no reason people need to engage with personal investing to get by.
Yes, I would read you as talking about defined benefit vs defined contribution plan (the latter is now most common in the US via 401k and I think leads to various social ills)
That said, I would say UK people would benefit from understanding the best financial order of operations in the current environment (6 month emergency fund -> maximize share and stocks ISA yearly contribution in low cost index fund)
British people think about finances almost exclusively in terms of their house price, but frequently that is not something you can easily sell or sell in a piecemeal fashion for retirement costs
There would genuinely good systems and neoliberals ruined it to line their pockets
Pensions are invested, you're just one step removed from said investment.
Good!
True but the funny part is pensions actually invest in several different markets.
I mean, that’s what a pension is…
As someone who has a cash ISA and is very averse to putting money in a stocks and shares ISA, my reasoning is that I use my ISA as a form of longer-term contingency savings - and I suspect a lot of other savers do too - rather than a future retirement income source.
Granted, I am a member of a pension scheme, but I don't want to risk the nominal value of my savings on a sudden market downturn when I might need them for a more immediate contingency (redundancy, serious ill-health, etc.)
Which you have acknowledged, I realise: bsky.app/profile/step...
Is it age based? I'm less likely to do this now I'm ancient but with advice and help I might have done it twenty years ago. Well, not 'might'. I would.
I had to work very hard to convince my Dad to put any of his money in a Vanguard Lifestrategy fund. But in the 80s he was very keen to buy British Gas shares. Difference = "Don't Tell Sid" campaign. Rather than changing ISA allowances, gov't should launch an ad/education campaign.
It's a failure of financial education. Brits have been ignorant on that forever.
I don't even have a cash ISA any more because I don't have enough savings for it to be worth it. (Maybe when we finish paying off the mortgage?) I do have a workplace pension.
Im pretty scarred by a financial services company selling me an absolute pup in the 90s, but the advisor who recently explained to me there are different products with different risk levels made S&S ISAs seem slightly more agreeable.
Now I have read the quote tweets and am also depressed
Emerging low trust society innit
Two important points: the countries with the highest savings rates Germany & Japan also have most risk-averse savers; and there isn't a scrap of research showing tax incentives increase savings, only distort it into the tax free products
With the economy being what it is and companies ranging from unethical and untrustworthy to unstable, what's the appeal in lending our money to them, with the added risk of not getting all of it back?
Unless you are paid and hold all your money in cash stored in trunks buried in your garden, your money is already being loaned out. It's just the bank doing it instead of you, and you correspondingly get much worse returns.
At least the bank guarantees you'll get it all back though, and even if they fold you still get a guaranteed return. I do have a stocks and shares ISA that I inherited, and sometimes when I get the statement the balance is less than the previous year. I don't like that lol
A properly diversified S&S ISA with a target retirement index fund is effectively as guaranteed as deposits, in the sense that both *could* fail (the deposit guarantee scheme isn't infinite!), but that would require the entire global economy melting down permanently, which is rather unlikely.
There's also the sense of, well, if you already have plenty of money, why gamble with it? As I said, sometimes the balance goes down year on year. The only time that happens with the bank is when I spend it
This is an aside, but in British usage, what is the difference between a stock and a share? To my American ear they're synonymous, except that you can also have a "share" of other things like mutual funds and ETFs.
Technically "stock" in a company is your total ownership, made up of one or more shares. Stocks as a plural means you have stock in more than one company. So you could have money "invested in stocks", made up of your stock in Apple being 50 shares and your stock in Coke being one share
That all makes sense as a matter of precise usage, but doesn't explain the usage above where people are asked if they are willing to invest in "stocks and shares."
Looks like "stocks and shares" as a phrase became popular in the late 19th century. Totally guessing, but it may have been a way to group together the related approaches of investing in multiple companies/the market and investing in one specific company.
Curiously enough, I just did a little poking around and it looks like it relates to the use of "stock" to encompass what most people today call government bonds: gilts were "Treasury Stocks" and were traded on the Stock Exchange.
So you could have a share of equity, or stock that didn't give you ownership in anything but did pay interest.
Essentially yes they're synonyms, British English just uses 'stocks and shares' to mean investing in markets
I wonder if you changed "stocks shares ISAs" to "pensions" what the comments and %s would be.
A lot will be the same. One of the auto-enrollment companies' default workplace funds had early years' investments in absurdly low risk funds, consequently offering dreadful returns, because their research said customers were spooked by potential losses, no matter how long they had to ride them out.
I don't dispute that an undefined number people wouldn't shift their stance. I'm interested in how much the numbers would shift.
1. Miss-selling scandals 2. Low trust in finance sector and Government 3. Negative economic view 4. Stocks rigged to benefit rich (insider trading and fast trading) 5. unclear protections if broker goes bust. Needs Martin Lewis to do some articles on it. No trust in govt & industry
I've started learning about pensions for a work thing, and want to violently shake the younger me who knew nothing and took terrible decisions. Financial education should be like not drink-driving, how to queue, or 'smoking is bad for you' - a deep part of our social culture.
Time for the investment trust industry to step forward.
I’ve got a stocks and shares ISA, arranged through a bank, with a regulated financial advisor. I can flex the risk of what I put in from “safe” to “adventurous”. The ISA is spread across blue chip companies. People need the above explaining, as it’s worlds apart from investing in single companies
I think part of the problem is that the process of investing in an S&S ISA feels far more dodgy than opening a cash ISA with a high-street bank. There's a lack of trust in the brands.
Like, I take a look at the options recommended by #MSE, and they are all either disconcerting tech platforms, or the sorts of places that feel like they cater to people with inherited wealth.
So you either need to be confident to do it yourself, or you need to not feel totally out of place going to a wealth manager and not being either exploited or laughed out of the room.
High street banks offer S&S ISAs too, though.
But if you dont know that, and they aren't among the recommendations from basically the most trusted finance person in the UK, people will run away
Raising the tax free limit for stocks and shares ISAs - say, an extra £5k not available for Cash ISA saving - would encourage lots of people I imagine
If I showed the returns on a years worth of a stocks and shares ISA, with an established digital bank, it might change minds, but then they’ll hear on the radio that they can make .01% more interest on a cash isa and feel great
Further proof that a mandatory investment scheme like superannuation in Australia is required to overcome the psychological aversion to sustainable retirement planning.
What do you think the fund managers of the companies doing Cash ISAs'' invest in. It comes down to the % mix of Gilts, Bonds, Shares, Loans, Properties. What % of each comes down to what risk you want to take in the type of cash ISA you put your money into.
I have an old occupation pension which increases by inflation - capped at 5% - I weep at the difference in value after 12 years vs a tracker
Nothing ruined my finances like saving for retirement and then needing to take the money out to avoid being homeless. Now I have no saving and 44k in back taxes
In a well arbitraged market, the risk neutral drift of any asset is the well collateralised repo rate. Shares have overperformed since 2000 due to an increase in profits relative to GDP, reduced regulation and taxes, increases concentration, low interest rates and a self-reinforcing momentum trade.
Yeah, basically if you’ve >£10k cash, no debt and do all your spending on a debit card the British middle class consensus is you’re ’good with money’ because almost all casual financial advice is actually moralising and makes you poorer in some way.
this is basically me, but I also have sorted and consolidated all my bits of pension into a single pot that I am stuffing money into, so am I good or bad?
If you are earning over say 50k definitely otherwise lifetime ISAS also good (but you are locking cash away until 60.
ha, I'm over 60. Spending the last half-decade of my working life shoving money into my pension for a) the eventual annuity and b) the tax benefits.
If you’re using a debit card, bad, but stuffing spare cash into a pension and not stockpiling it is A++
tbh I'm not sure I'd get a credit card - I suspect my credit score is really low because I have no mortgage or debt, and haven't had for a few years
I use my credit card about once every three months to keep it active otherwise I'd be in the same boat as you. It's an 'in case of emergency' thing I probably don't need.
the emergency that credit cards are for is the failure of anything you buy directly with one because they are also responsible for it alongside the retailer.
Yeah, that’s a risk you’re taking that I couldn’t stomach.
I got one with basic terms just of Monzo in the hope of getting a better one later. It does help a bit to have last payday accruing interest during the month.
That but more importantly you have far more protection on purchases over £100, and also you’re not giving online vendors direct access to your bank account.
It basically tells you if it's likely to reject you before it does a hard credit search and you can bottle it then with no effect.
What is the issue with a debit card? 🤔
Any purchases over £100 on a credit card are subject to strict consumer protection. Not only do you lose that on a debit card, but you’re giving people a way to instantly remove actual money from your actual bank account. It’s like going shopping without a financial condom.
Very, very good
😁😁😁
According to the ft the ftse 100 is up 32.44% over 10 years. I can understand why people prefer cash investments.
American money advice: invest in cheap trackers monthly. Don’t try and time the market. British money advice: switch energy provider every quarter, run your washing machine at odd hours to get free electricity and here’s a great trick to get more nectar points.
Is this partially due to our financial advice laws?
Probably. A deeply ingrained cultural memory of scams.
“A deeply ingrained cultural memory of scams.”, which is totally reasonable.
Don't think you can rule out how much Equitable Life and the MGN pension scandals disproportionately hit journalists.
Also I remember my parents getting hit by miss selling offset mortgage miss selling. Ultimately Fin services have proven to prefer ripping people off over investment advice in many situations.
Endowment mortgages for my folks, which was the previous decade’s mini scandal
(But yeah the point stands)
Oh that’s was what I meant. Obviously as boomers the house price rises meant they never really struggled but as a kid learning a bank more of less lying cost you £10k makes a mark.
agreed entirely! I remember them worrying about the shortfall letters through overheard conversations.
I’m an economist so have a different view to many on risk and reward. But many seem very much worried about “losing everything”. When really that is more fraud then poor investing, have a diversified portfolio and take the odd punt is fine and in the long run you’d have do fine.
I was a coder in "The City" and I got hit by the Equitable Life thing. Knew at least 1 or 2 others that had pensions with them too. Apparently some people knew they were dodgy but that grapevine didn't reach me, my investment knowledge came from the internet when I was at home, not work contacts.
There are so many. I knew someone that sold assets at retirement and the bank manager put them into some fund or other, in the 70s! - they should have been minted 20-30 years later! But of course huge fees and so-so performance meant they were just ok, instead of rolling in dosh.
How youn switch energy provider. It's there a website.
Have you seen the US/Netflix series of the personal finance advisor, kind of variant of Martin Lewis? He basically always starts with "Well, let's get you a new job paying 20% more"
There was allegedly a Forbes headline a few years ago telling readers to *simply* earn more money lmao
Normally it's Tory politicians telling us this.
I am not a Tory politician but tbh it is true that putting energy into getting a promotion or changing job is realistically going to be a lot more profitable than any amount of scrimping or saving or switching providers
Also the Americans are absolutely right, invest in tracker funds. Don’t tell Rachel Reeves but.. not just/primarily UK ones either.
Completely agree. Relatedly, the American posters have been surprisingly generous in not rinsing us on this subject today quite frankly.
Comments like this by the Lord Mayor (chair of an active management fund) don’t help. Amazingly self-interested.
The US had John Bogle revolutionise the market in 1970s (first tracker, Vanguard set up as a mutual owned by customers). And insiders like Charley Ellis writing “The Loser’s Game” on active management. The UK had active managers who became hugely wealthy, and PLCs focused on shareholder returns.
The "Europoors" discourse has rather dropped off of late since "liberation day", tariff palooza and half the country's 401ks being (temporarily...for now) tanked by the head of state delivering a press conference....
The absolute last thing you should do is invest in UK stocks.
Tbh I agree with this, but from what I can tell most Brits who do have stocks seem to have UK trackers 🥲
It may be a feeling that at least they're familiar with the companies.
I don’t really understand it, looking at how the UK economy has done compared to other economies over my adult life. But these decisions aren’t just based on logic
Really, I thought most people bought world or US trackers? (I'm 100% in the UK now, but thought that was a pretty unusual position??)
FTSE100 actually has performed well. It's the FTSE250 which has performed poorly. Guess who has a chunk of the later?
Well, it depends on your timescale. Guess who bought loads of the FTSE 100 in the 2009/2010 era? ("I know the 250 does better in the long run but it looks a bit expensive just now, I'll buy the 100 now and look out for a chance to switch ...🤦)
The size of the 100 is so large relative to 250 that an all-share will be almost as good.as a 100.
It's comical really because there is nothing more socialist than accepting you can't beat the market and settling for the same return as everyone else. (Actually maybe there is, it's the NFL draft system, deliberately designed to benefit those most in need).
The UK government through the Lifetime ISA will pay people a 25% bonus for the contributons up to 4k a year (enough to compensate for all but the very worst market years) which you can put right into a US equity tracker, yet folks on here seem to think all this is a scam to subsidize the City.
Yes! 👍
Cool, where are all these high paying jobs ? Or how about every time anyone asks for a wage raise, the media and tory politicians collectively agree that they are just being greedy and dont deserve anymore money.
Really? At a return rate on average in the US stock market of approximately +10% for the S&P? Do you get a compounded 10% pay rise each year?
Well, you need the money from the payrise to be able to afford the money for the investing.
No doubt true in many cases. This discussion is about British reticence to even get involved in investing. My point is the payout is or has been excellent. If you have the opportunity it outstrips any pay rise.
And then you need to not spend it. I know things are tough over there. I also know that the vast majority are leery of investing and leaving free money on the table in gov incentives.
Sure, but what are your options? Get the ed job, change to another housing publication that would pay more or change publishing sector or go to PR industry or similar? You don't need to answer this but there's reasons why you haven't already done that I'm sure.
Well, I do sometimes think wistfully about why I dismissed my dad’s advice to do engineering at uni… but also I have gone from deputy features editor to deputy editor of the publication, so I’ve not been entirely motionless in my career…
No no, I'm sure but it's just the idea that the next move isn't always clear or easy. Jobs that suit me at the next Civil Service grade are fairly rare and see to attract huge volumes of applications. (And obviously wage stagnation is a huge, rarely acknowledge issue in this country.)
Sure I know that feeling. Also there’s a bit of a risk in a new job, it’s not always clear it’s a good move. New jobs can be hard, especially at first. There’s plenty of reasons why not to. But also it’s pretty hard to get a better income without changing anything
And almost certainly the more you earn, the more damage you're going to inflict on the world. So is it worth it?
Ramit Sethi?
Follow both sets of advice - a win win
It would be very interesting to poll people to see what proportion understand quite how generous the pension contribution system is. Tax relief on £60,000 is vast by most people's standards. You really have to be in the top 10% to have any chance of using it.
You're right but people are saying it's Martin Lewis's fault like he's the only person in Britain who might have something helpful to say about personal finance. He's very clear that he personally invests but isn't certified to give advice on investing. Really, it's an educational thing
People often ask me for advice (because I’ve been the EMEA CFO for Morgan Stanley Investment Management, Hermes IM and Neuberger Berman before my current job), but actually I’m not licensed to provide investment advice. I always point them at this guy, who is excellent. youtube.com/@jamesshack?...
He’s a chartered financial planner, and his guides to personal finance and investing are, in my humble opinion, absolutely spot on.
Mr Lewis isn't licenced to provide advice. Mind you it would be good if his website had generic investment information.
It has some. I got a cheap deal off there to sign up for a stocks and shares ISA with Moneyfarm.
You mean I should be doing more than this to save money?!
This does bring back memories of the UK...
It’s all Martin Lewis fault, he does good, but this stuff is not good
Doesn’t this all date back to Barlow Clowes, Allied Dunbar Multiple scandals from the cowboy end of Big Bang that made people v concerned about being conned.
In prime time every week on That's Life too
Can attest to this model 100% - add “find a low cost broker like Fidelity or Vanguard”. Brits need so much education on investing. It’s been intentionally cloaked in mystery and high commission fee structure for ever.
Agree, so many suckers out there on the wrong energy tariff.
To be fair, the FTSE 100 has not been anywhere near as good an investment as the S&P500, whereas UK property has had comparable returns to US stocks. All the more astounding considering that the US government will subsidise your mortgage rate for thirty years!
I feel like this does at least mean proportionally fewer dentists lose all their money in penny stocks
Your wife is ok with the running the electricity at odd hours ?
It’s been good advice, however it doesn’t really account for the world’s biggest economy deciding to ritually disembowel itself. A depression is underpriced right now imo
Often people who will happily invest in illiquid property with the intention of renting it, and then scream when the rental market becomes less profitable but they can’t easily sell the um illiquid asset they’re deeply in debt for
Is there an issue (FT notwithstanding) markets only make UK news when surging or crashing, as opposed to 99% ticking over, presenting a perception of risk? Especially due to global crash, Brexit crash, Truss crash all in a smallish window. I'm sure market reporting used to be more common/accessible.
Yeah. I think trying to force people to change behaviour through regulation the wrong choice for this reason. It is really a public information thing.
That's what tagerted advice is, isn't it? The fca is allowing banks to give generalised investing advice without people having to register with an expensive advisor, I think?
It’s the theory of Targeted Support, yes.
Oh, fuck off with your smug superiority about people who remember "investments may go up as well as down" and don't want to jeopardise their savings. Including my 80-year-old mum. And if you don't think Reeves is a spiv, you're a mark.
80 year olds aren't 55% of the population. Yes, you should move to safer investments (like bonds) as you age, but the vast majority of people not proactively putting their tax efficient savings in index funds are taking a sledgehammer to their own retirement.
The vast majority of people aren't going to be able to afford to retire, especially if home ownership is not happening for them. If money is tight (a majority of the UK has >£1000 in savings) then you're not going to want to do what seems like a volatile and scary thing with yours.
31% (www.bbc.co.uk/news/article...) is not a majority, but I agree that low savings makes some people more anxious to invest. The answer is to explain to them why they shouldn't be anxious about investing (and indeed should be anxious about *not* investing instead!) even in small amounts.
For me personally it wasn't something I looked into until a) I knew I could afford to put that money away long-term and not touch it even in an emergency b) I would be comfortable losing money if things went awry. If you've lived through multiple recessions, crashes etc that's ingrained.
I know this isn’t what you are saying specifically but you can instantly cash out a stocks and shares isa
IME it takes three to four days to turn your S+S back into withdrawable cash, which is fine if you have an emergency fund already to cover whatever you're withdrawing it for, not so much if you need the money now because you don't have enough to save in both.
yes it’s not instant access like a cash isa no
it does take a few days
Yeah, I am less depressed that this dumbfuck can’t tell the difference between his octagenarian mother and what people in their 20s or 40s should do and that his response is to be abusive while quoting the terms at the end of an advert.
"Don't be abusive, dumbfuck" is not the winning line you think it is.
Do you think me saying "fuck off with this shit" is more abusive than you calling me a dumbfuck?
I'm a woman, the ads are what most people think of, my mum is the main person I've heard about this from, and I think saying fuck is less abusive than telling people they're idiots who are going to live in poverty in their old age if they don't gamble with their money now 🙃
The vast majority of people DON'T HAVE SAVINGS
One in ten is a "vast majority"? Did we reinvent maths when I wasn't looking? Obviously, there are people for whom the advice is not relevant. They are not 55% of the population. www.bbc.co.uk/news/article...
Ok, I'm in that 90% though, and my savings account has had 69p in it for over a decade. I get a couple of pence interest every so often and put it back down to 69p because I'm childish. Similarly there's a government mandated pension somewhere. Perhaps I should have put in the word "meaningful"
I think it's very odd to claim citing a reputable source (the FCA) is cherry picking, then trying to refute it by citing a single other source which shows a (pretty small) difference of 6% By the way, said other source *also* suggests that more people should be using S&S ISAs...
Nobody with savings under a grand should be using s&s
Why do you think that? S&S ISAs can be opened for free.
You can also set up a monthly direct debit into a S&S ISA for as little as £25 - doesn't sound like much, but get into the habit of setting it up and forgetting it and it adds up over 5/10/15 years.
And there surely can't be a single person who doesn't have a spare £25 every month that they can just forget about right?
Instant access and free to maintain, and with a return that's noticeably more than a savings account?
Yes.
Brexit has taken a sledgehammer to our retirements. Austerity had taken a sledgehammer to our retirements. Unfettered capitalism has taken a sledgehammer to our retirements. Being unwilling to gamble with savings - which again, may need accessed for emergencies - is not the problem here.
All savings are "gambling". Finance, and life in general, has inherent risk. Investing in globally diversified index funds and then transitioning to bonds in later life is as low risk as you can get. Even if you hold all your savings in cash, you are "gambling" that inflation won't erode them.
I'd love to know what percentage of the country you think can afford to make "tax efficient investments", in accounts they can't touch, right now. I suspect it's a bit higher than reality.
You can open and maintain an S&S ISA for literal pennies (or free, depending on platform) with the ability to "touch" the account at any time. If someone has literally any savings, there is no excuse.
Lol sorry, didn't realise you were an FT guy. Carry on.
It’s a long time since I’ve lived in the uk but isn’t the wariness of stock investing primarily based on exorbitant fees charged by middle men? Moving to the USA and being forced into investing w private pension gave us a HUGE kick in the butt to research options which are very much better here.
There are numerous free or extremely low cost S&S ISA providers.
Brits now benefit from having Vanguard and Fidelity as part of the market offerings. They have some v low cost market-tracking investment options and I sense Europe will be the safe place for investments for the near future.
Yes I have helped family members take the leap. Not well advertised and reticence is very baked in. In the USA we moved from final salary to personal pensions years ago with a LOT of freedom (employer-dependent) and forced transparency in investing options which flowed into general brokerage mkt.
I’m extremely willing to invest in stocks and shares. I call it “pension contributions.” But even if I wasn’t a dual national subject to the US tax system, I’d be reluctant to invest in additional stocks and shares via an ISA, given I’m already doing so via my pension. Isn’t it good to diversify?
I tell you what why don't we have some kind payment thing based on earnings and we as a collective (let's call it a state) can invest in our long term health and wellbeing. I've even thought up a name for it. How about National Insurance?
The real answer is that British people are trained to invest in houses, not stocks, and a great deal of class identity issues on top prevent adoption. The joke answer is that to invest in shares requires a positive outlook to the future, and England alone has 15.5 million northerners in it
Hey if my grumpy county Durham born Dad can get into investing there's hope for anyone.
it's not investing in houses if they let them fall to the respectable edge of disrepair
To be fair the above is the safest answer in British politics. If you just respond "housing bubble and class identity" it's like the Free Parking space on the Monopoly board
I'm not convinced most people should be 'investing in stocks and shares'. 'Investing in slightly higher risk and reward investment vehicles like tracker accounts' sure. But actual stock picking is only really any good if you want to make it your hobby. We don't have a good language for this.
You say “we don’t have a good language for this”, but be honest with yourself: you know that I, and everyone who says this, means things like tracker accounts and stocks and shares ISAs! It’s not a language issue, it’s a public education one.
It's not solely an education issue. It's also an experience issue. In either direction.
I think people hearing this knew it 20 years ago. Less convinced they know it now, I don't hear those accounts advertised. There used to be a consistent message on how sensible trackers are. But I think it got lost post 2008 when nothing was growing anyway. Not saying it's impossible to rebuild.
how much in savings does the average person have, Stephen
Enough that they'd be better off putting it in an S&S ISA than sitting on cash, which is an inherently losing proposition.
lol
It’s a weird change as so many people who were from an ordinary background made a lot of money from shares in the 80s/90s- my uncle left school at 16 but had an extremely safe retirement as he bought shares and read the money sections of various papers
The Thatcherite boom is where a lot of the perception of spivvery came from. May not have been all true, but the public image, which the City seemed to love, was braces, cigars and Charlie.
He was very practical and worked in project management (so knew a spreadsheet etc) but he was forever telling me that a good understanding of the merits and dangers of shares would make a big difference
📌
I think it’s because we hear all the time about bankers bonuses and the 2008 crash shenanigans where taxpayers bailed out the banks only for them to continue to profit. Financial services has a poor image tbh.
Losing 50% of my pension pot and shares ISA in 2008 dulled the attraction for me. Hence I'm still working at 70. Yeah, I still own investments but I don't want the government to dump alternative places to stash accessible cash like cash ISAs.
It IS important advice but most people remember the various banking crises where the bankers got bailed out and everyone else took the hit. Just politicians get away with it etc etc etc. I'm not saying it's right or a balanced view, but that's how it is. Confidence is low.
I feel like the slew of recessions in my lifetime, coupled with the insane fascist, happy to crash the global economy on any demented whim on the other side of the pond makes me a little
But despite the slew of recessions a stocks and shares ISA is outperforming a cash ISA since the financial crisis. UK has pretty much always been averse to saving (it’s partly why there are so many crappy BTL boomers with two or three properties they run badly).
Indeed, BECAUSE of the financial crisis cash ISAs and savings accounts have been a worse deal, because the stock market recovered in a couple of years and we had a decade of near-zero interest rates.
I put my 2nd redundancy payment into a s&s ISA in 2008 and it did me very well but past performance is no guide to future etc
What you're saying is that for the good of the economy you need to be fired?
Not fired: made redundant with 6 months salary
I have no idea if it's changed since I left secondary school ('04), but there's zero room for learning about financial literacy, or anything useful for life outside of the classroom for that matter. In my circle (friends/siblings), I'd say it's the ignorance that fuels the aversion.
Agree. That’s a big reason why I think it was a dumb proposal to try and fix it by lowering the cash ISA limit: people would just leave it in their current accounts! Government needs to fix the financial literacy/advice part and over time the savings problem fixes itself I think.
Hard agree
I wouldn't invest my savings in stocks and shares. but I would invest an affordable portion of my disposable income in stocks and shares, ie, I would divert some money from flowing automatically lower risk into higher risk. those are different things.
Bit potato puhtato for me, but I see what you mean.
Actually, no, now I think about it, you're completely right, in that if you can only afford to put away £10 a month, you really should just put that shit in a tracker or a stocks and shares ISA.
And this is a big part of 'the UK middle classes save less effectively than the US working class ones'.
it might not be what economists think, I don't know. but losing money that you've got used to having is way more emotionally difficult than losing/risking money you've only recently got. you can risk £50 on payday but not your £5000 emergency fund. this is why PAYE is less painful than wealth taxes!
And not only US working classes! Moving from the UK to Sweden one of my biggest culture shocks was realising that essentially all Swedes have investments no matter how small. After 9 years here it would feel like a waste to *not* invest my savings (outside of my emergency fund)
Or invest 2 months’ savings on anew kettle to save an extra £10 a year.
I’ve been on a rollercoaster as a freelancer/contractor since the covid years - one thing I’ve never even thought about cutting back on is monthly payments into the kids’ stocks and shares ISAs
“Put that shit in a tracker.” Move over, Martin Lewis.
Honestly, index trackers are, for want of a better word, awesome.
if you've been saving for a house deposit for 15 years and then the Chancellor is like, "why not risk it all" that sounds totally unappealing. if someone says, would you consider putting half of your next payrise into a high risk/high reward account, I'm more like, yeah maybe
I saw somewhere that three times as many people have crypto investment than stocks and shares ISAs which means they have an even more muddle understanding of risk than simply not investing.
I wonder how different these figures are from the "Tell Sid" days? Share buying was portrayed as a good thing to do, and most people who took up privatisation shares would have made money. However, there have been several crashes since then where people will have become more wary
It was portrayed as a good thing as the Tories would underprice the shares at float and Sid would make a quick profit
Ok I have fuck-all income (literally, I've never earned enough to pay income tax), will likely never be able to work full-time reliably, never earn enough to live on independently but I DO have a stocks & shares ISA for an inheritance from a few years ago. So maybe I am good with money after all?
Clearly! (Part of the UK problem IMO is we tend to conflate “good with money” with “having a lot of it” - but loads of that is dumb luck.)
So much this. People saying that their wealth is down to their genius / industry, luck not being a factor, and ignoring any basic social contract…brings out my inner socialist.
Me normally, versus me whenever people talk about the roots of their success without acknowledging luck or the work of others.
The struggle continues.
I'm not sure one could describe my career as a success but I've been luckier than most and it's all, 100%, down to my parents, a few work friends/mentors and several of the teachers I was lucky enough to have at my primary and secondary schools. And my kids for giving me the incentive to keep at it.
I've known a lot of people who have a lot of it through dumb luck (inheritance). Not one of them believes it was down to dumb luck.
'choose your parents wisely'
Well even thinking about it tends to make me hyperventilate so I know what I do have could be 'working harder for me' as my parents say, it's just basically completely terrifying to even *think* about the future, let alone try to *plan* for it
I am ina ludicrously privileged position in that my parents are still willing/able to put a roof over my head & feed me. I don't currently qualify for any benefits but it's no wonder the government's PIP changes caused so much distress. Whenyou have a disability/chronic illness you can't necessarily
Change jobs to earn more, work more hours or start a side hustle to improve your income
I wasn't aware ISAs COULD be inherited. But it seems they can be since 2015. You live and you learn.
Ah sorry, badly worded, I inherited some money then stashed it in as ISA! I didn't know you could inherit them either, don't tell Rachel Reeves (although, maybe someone should given *gestures at everything*)
Inheriting them would seem to be a great idea since someone else has already paid the fees to buy the stocks.
I told my Nephew to open a stocks and shares ISA when he started work. He told me that they were “only for rich people” 🤷
Honestly the idea that I can trust the words "stock market" has been beaten out of me since at least the Finanical Crisis and it barely existed before then As it is I stand Tharn in front of yet another unprecedented crisis and jobs that increasingly pay enough to keep me afloat but not comfortable
But a) despite those crises, someone who has been able to save for 20 years was *better off* with a tracker account or a stocks and shares ISA than just putting it in cash and also b) the global financial crisis was global! It's not why British people in particular save in a sub-optimal way.
I could have invested a decade ago, but the problem is also tied into "I'd like a house one day" my deposits for this were once savings Lower housing costs and people are going to be far more willing to put money aside into saving. We live in a culture focused on rainy days and "soon..." promises.
This has if anything gotten worse, at least if you live anywhere in the SE Rental costs, mortgage costs, all of them just eat away and you guard your money like Smaug hordes treasure. Logically you should invest, you feel shit for not doing it, but you cannot let go.
GFC hangover if you ask me I bet a poll of the Japanese would look very similar post 89'
Are you sure ? I appreciate that what people are doing is a sort of self perpetuating prophecy but if one reads this book, the conclusion is NOT that stocks will be a great investment in the early to mid 21st C.. www.amazon.co.uk/Triumph-Opti...
The S&P 500 is up over 450% since the book was published.
Yes but the FTSE isn’t - the rise of equities is contingent on lots of factors it isn’t just a given
Sure, the FTSE 100 and 250 are both not as up as the S&P 500 (although they're still massively up, and infinitely more up than cash!). That's a consequence of lower global diversification. Could *global* equities stall *for life*? Never say never, but that would require the world imploding.
All the fundamentals for the long equity stretch that ran from 1950-2000 are either missing or about to go missing from Euro Atlantic equities. This isn’t even mildly contestable & the fact that global dumb money is acting as weird “stabiliser” for the S&P is by the by.
If I’m wrong you get to ignore me & get rich but no one who is paid to think about this kind of thing is putting their own money into equities So it’s too “pat” to just say “but equities are a winner, people are foolish” But crypto makes money while professionals ignore it so just go for that too
True, leaving aside the future case, US index UCITS funds have existed forever. So, it’s not like it would’ve been hard for people to invest
The British have longer memories than most, and they remember grandma's tales of the 1929 crash? Also, the prevalence of brokers advertising "contracts for difference", which really do sound like gambling.
More likely the 2008 one.
Why do Brits insist on calling equities "stocks and shares"? Still looking for the answer. PS They don't call fixed income bonds, debentures, notes, and bills do they?
My favourite responses are the ones along the line of “some people aren’t interested in acquiring wealth just for the sake of it.” Because obviously savings for retirement aren’t to pay for a roof over your head, heating and food when you are no longer working but just greed…
That's what a state pension should be for.....controversial I know.
I quite agree, but sadly no longer the case and god knows where we will be in 30 odd years
It never was the case. In 1946 when it was introduced, it was £46 a week in today's money. In 1980, it was £116 in today's money. It is £230 a week now; so over the decades it has improved rather than deteriorated. It was means-tested in 1946 (so potentially even less than £46): not the case now.
I find it really quite odd that people are so readily dismissing the idea they have *any* responsibility for looking after themselves financially past a certain age. This is irrespective of what you think is a reasonable state pension benefit.
On social media, you get a lot of people comparing the UK state pension with European ones. They are apples and oranges comparisons, completely invalid. The UK system is predicted on a modest state pension supplemented by occupational or private pensions; and on lower social security contributions.
MUCH lower contributions. It’s a case of you get what you pay for.
Social security in France is also levied on income from investments, rents etc, and also on capital gains, so is more like a tax really. We should be collecting it, at least in part, off unearned income. That could either finance public spending, or ease NIC rates for employees/self employed.
Not to mention a bigger burden for employers. Just a totally different proposition, but there is no magic solution to financing an ageing population.
Given that NI is functionally a tax, I see no good reason for an employers’ NI which is not paid by the self-employed. The tax world is replete with schemes to dress up employees as “self-employed”, notably all those gig workers like couriers, but also dubious LLP memberships.
Then let's fix that instead of tinkering?
Saving for retirement isn't "tinkering" by any stretch. If the state pension was more than enough for an ok quality of life, you would still benefit from saving. Discouraging people to do so on the back of an ideology which is rooted in hope that *something* will happen in the future isn't helpful.
The argument today wasn't about the benefits of saving, it's more exploring why people are reluctant to invest such savings in stocks and shares.....or gambling as it is more commonly known around here.
That isn't the point I'm replying to, which is the implication the state pension should satisfy all your financial requirements forever after a certain age. The most you could expect realistically is a universal basic income. And there's barely even an appetite for that with the UK electorate.
Why bother? The whole shitshow is going to collapse again, and most under 30s believe in retirement as much as Santa. And besides, I have the best retirement plan thats guaranteed.
And yet, since auto-enrollment, presumably most already are (but maybe don't realise?)
It's tone deaf tbh to get het up over stocks and shares after pandemic, war, Truss & Kwarteng just shot people's investments to pieces over 5 years. As if the UK isn't massively culturally financialised already and we know what we're doing. Historically, stocks and shares have outperformed... sure.
People say they have. Whether they actually have...
The FTSE 100 is up 42% in the past five years. Nobody's investments were "shot to pieces" irrecoverably, especially if they were globally diversified (as they should be). It's not tone deaf to point out that people are making their own retirements worse for no good reason.
Okay, hyperbole aside, the average return on a stocks and shares ISA over past six years: 1.78%. Return on an average cash ISA over the same period: 1.1%. Most you could have lost on a year's investment? Stocks -13%, Cash -1.1% People choose based on the risks & invest what they can afford.
The return of an S&S ISA depends entirely on what you're investing in, I'm very curious what source you have on hand for a return of only 1.78%!
And indeed cash ISAs, I've been getting ~4% for last 3 years at least.
Yep. It was (not joking) fool.co.uk 'what is the average return on a stocks and shares ISA' - from October so yeah includes the pandemic year. It notes the historically higher rate of return. My Q is, are people in the UK not investing in them because they're stupid? Or because risk averse/poor.
My instant (and probably dumb) reaction to this is "jesus... is this why we all treat housing like an investment, because we're not brave enough?" But I wonder if people could think of it as "buying a bit of a company you like" might make them a bit braver? Or if people knew about dividends.
Tell Sid didn't work much did it? Royal Mail, if you are going to privatise your mail delivery network for some reason, should have been a mass share scheme like British Gas was?
I actually did get in on the RM IPO and made quite a bit of cash, despite being against the privatisation.
Which, yes, makes me a bad person but, you know, I've also invested in Rolls Royce in the past, so it's fair to say I'm not the most ethical of investors.
I think e.g. people might be willing to "buy a bit of a local business to make a share of the profit" before investing in stocks and shares, which is just a micro level of the same thing, so perhaps a reframing?
🧐 It depends, doesn’t it? How much you have already saved & where, how much you now want to save, how quickly you might need to access it, how long until you need it, risk appetite. Cash ISAs are useful. Making it sound like they aren’t is disingenuous. #101 take good independent advice.
A couple of reasons why in my view: (1) compared to the US, we don’t really talk about our pensions and investments. In the US, your 401k is a big deal. (2) Mis-selling hangover: endowment mortgages, equity release, car finance, PPI. We collectively don’t trust the industry or financial advisors
In the US saving for my 401k is what fucked me over the most. Now I owe massive back taxes *and* have nothing to retire on at 44.
I didn't claim it was a better system, just that it was more visible and led to greater financial literacy.
Firmly believe majority of people in the UK have no idea how much money they will have when they retire.
They have that on common with Americans
Just fulfilling our patriotic duty to give UK banks cheap funding.
"Duuuuh Reeves is just a paid shill for big finance! Everyone knows we should all be max levering ourselves up to buy wildly overpriced housing assets."
You can't go wrong with that approach, unless there happens to be a sinkhole under your real estate.
I mean in real terms (prices adjusted for inflation) residential properties have been a pretty terrible investment for around two decades or so
Quite surprising. Stocks haven't been that great either tbf.
Wait, this means that the terrible housing cost crisis as a multiple of wages is entirely due to stagnant wages, the price rises themselves have been pretty “meh”? That seems like… important information
Indeed. It's possible that house prices reached a peak of unaffordability 20 years ago, and have bounced round it ever since.
They’re less affordable now because wages have fallen in real terms over a long time, which is pretty unprecedented
bitc0in fiXeS tHis
(This is both a subtweet of the other responders to that tweet and, when I think about it, myself)
I'm not sure whether the finance industry persistently portraying investment as a very complex high risk thing only geniuses in the city can participate in, or people of a left wing persuasion being sceptical of such raw capitalism is more responsible for this attitude.
How do you check the quote tweets, btw? Bizarrely I know ppl who would probably also be answering they 'don't really understand the stock market and think shares are too risky' who are actively 'investing' on a routine basis in crypto (which they insist is really CGT-free "cos it's on Coinbase".
Just click on the post in question and then clicking on the quotes bit. And god that Coinbase story is going to haunt me.
One guy is a semi-skilled shop floor worker I'm told sitting on 1/4 mill in BTC gains & there are many others who started 'dabbling' later. Almost none of them would touch shares with a barge pole. They aint bothhered abt 'reporting requirements'...
...actually someone should tell Chaminda it might be worth going after those windfall gains as rather more politically acceptable than doing away with PPR relief...
Wow, clicking on quotes should be part of a drinking game. You can't beat stuff like this
Perhaps a large % of us just got freaked out by the orange crop report in Trading Places
