Are you looking to invest but feel confused with where to start? Finance expert, Jessica Robinson, shares her advice for beginners on how to effectively invest your money, along with her research on why it’s so important that women start to invest.
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Investing is something you’ve probably heard about, from your bank, your job or your money-savvy friend, but do you actually understand what it is and how it might benefit you? The world of finance and investment can seem scary. However, getting started with investing is actually fairly simple. Plus, it’s a crucial part of improving your financial literacy and getting yourself prepared for the future.
This is especially true for women. New research by Jessica Robinson for her book, Financial Feminism: A Woman’s Guide to Investing for a Sustainable Future, shows women face a £15 billion gender investment gap, with men holding double the amount of investments that women do.
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Why aren't more women investing?
“When it comes to women, we need to be saving and investing for our pensions,” Jessica explains. “Because at some point we are not going to be earning an income.”
According to Jessica, women in the UK are not putting enough money aside to invest over a period of time to support them in retirement. “Men seem to invest more than women do, which means they have a bigger financial pot when they retire,” says Jessica. At the same time, “women quite often have to take time out of their careers, whether that’s for maternity leave or something else,” says Jessica. “Plus, the existence of the gender pay gap and the fact that women tend to live longer than men, means there’s a disparity now happening between men and women when they retire.”
Most people are in a position to start investing, according to Jessica, and it’s not something that requires a huge amount of money or savings. Here, Jessica shares her advice on how to get started with investing, as well as making sure the companies you’re investing in align with your personal and political beliefs.
Speak to a Financial Conduct Authority registered financial adviser before taking financial advice, and think carefully before making any decision.
The key investing terminology you need to know
Stocks are shares in companies that you can buy on the stock market.
When you buy a share, you buy a portion of a company.
Bonds are fixed income products - essentially loans - that recipients (usually companies, cities or governments) will have to pay you back for with interest.
The stock exchange is made up of public companies, which means anyone can buy a portion of the company.
Capital is money you put into something with the intention that it will grow.
ETF – exchange traded fund
An exchange traded fund is something you can buy shares in, rather than buying a stock, bond or commodity. You can buy or sell your share in the fund but you won’t own any assets.
What is investing?
“Investing is actually really simple,” Jessica says, explaining that investing means putting your money into an asset or product with the goal of generating an income (this money is known as capital).
You will receive income if you purchase shares in a company and the company grows (the money you receive is called dividends). Or your income will come from making a profit by selling the assets that you have bought because they have increased in value.
You can either buy stocks or bonds, or as Jessica recommends for beginners, exchange traded funds, which allow you to diversify your risk and helps you to protect your money because you don’t actually own any assets.
How much risk is involved with investing?
“Investing is all about risk,” Jessica says. “I will take a certain amount of risk in the hope that I will receive a certain amount of return. So whenever you make an investment decision as an individual, you have to be comfortable with the risk you’re taking.”
This doesn’t mean that the risks are always high, especially if you make informed decisions. You can use a financial advisor to do this, speaking to your bank and also using all of the free resources available on the internet, like blogs and journals about investing. You can also opt to invest in companies that have had continued growth, which will also lower the risk, as well as using exchange trade funds instead of buying stocks and bonds in order to diversify your investments which will reduce your overall risk.
Jessica is keen to stress that the more risk you take, the more potential there is for growth but it’s all about deciding how much risk you’re comfortable with for that growth to take place.
Jessica also explains that the earlier you start investing in life, the more wealth you can accumulate over time. This is because the longer your money is invested, the more your money will grow, due to interest rates.
Where do I start with investing?
“A lot of people say make sure you’ve got enough cash to cover you for three months, then start investing,” Jessica says, adding that you can use investment apps like Ellevest, Stash or eToro in order to start investing with as little as £10 per month.
Investing can be overwhelming but Jessica stresses that, “the moment you start, your confidence will grow.” She recommends talking to your friends about investing, opening up conversations and asking them for advice, as well as sharing your own tips.
Before you start, Jessica also suggests that you seek financial advice, most of which you can get for free. Talk to a financial advisor and start doing your own research by reading blogs and articles online.
Jessica advises to get started as soon as you can. There’s no reason to put off investing as long as you feel like you’re adequately informed and educated on how it works and in a financial position to do so.
How can I make sure my investments are sustainable and ethical?
Jessica is a big believer in making sustainable investments, by which she means, making sure the companies you invest in are in alignment with your beliefs. You can do this by researching the backgrounds of the companies you’re investing in. Or there are also sustainable ETF products that are specifically designed for someone who cares about climate change, for example, that only tracks clean tech companies.
Jessica’s tips to make sure investing works for you
- Learn about investing yourself – part of what will close the investment gap is women getting stuck in and taking action themselves.
- Be clear on your goals – decide what is important to you personally and don’t be told by someone else what your goal should be.
- Figure out how you feel about risk – this means really understanding what kind of growth you are looking for and the level of risk you are okay taking on in order to potentially achieve that growth.
- Talk to others – speak to your friends and/or a financial planner.
- Remember that it’s an ongoing process – keep learning, practicing and listening.
Jessica Robinson, finance expert
Jessica Robinson is a leading global voice on sustainable finance – formerly Head of Asia for the UN-supported Principles for Responsible Investment, CEO of the Association for Responsible Investment in Asia and a leader in the Global Sustainable Investment Alliance. She is also the author of Financial Feminism: A Woman’s Guide to Investing for a Sustainable Future.