Learning to invest

Ciwan

Hello

The past month or so I've been reading Rich Dad Poor Dad and The Richest Man in Babylon. Both books put a lot of emphasis on investing, the idea that each pound you hold is a little worker that can (if done right) work and bring in more cash for you.

How does one get started with investing? I know nothing of the terminology nor resources.

Do you know of any books or learning resources that are targeting the UK? I would like to start learning more about investing.

Also, how much money does one require to start investing? Is £100 enough? is £500 enough? Or must I have anything above £5000?

Any help and advice would be greatly appreciated.

Thank You.

colsten

There is a long thread with recommended reading: https://forums.moneysavingexpert.com/discussion/5043692

You should have a readily accessible cash fund of some 6-12 months living expenses before you start investing. Having said this, you should always make the best of your employer's contribution to your pension, which is a very important investment.

Ciwan

Thanks Colsten. I've gone ahead and purchased Smarter Investing by Tim Hale. I'll give that a good read. And I'll also read the DIY Investor UK blog.

By a cash fund, you mean I ought to have enough savings that I could live on (without a job) for 6 to 12 months?

bowlhead99

Ciwan wrote: »

By a cash fund, you mean I ought to have enough savings that I could live on (without a job) for 6 to 12 months?

Basically yes - not literally a fund that invests in cash, but a pile of savings that don't go up and down with the stockmarket.

Like, you don't neeeed £5000 to invest. You can start making investments from £50 a month or maybe a lump sum of £250-£500 upwards. So it is theoretically possible to invest if you've only got £1000 in the bank to call your own. You could just go ahead and invest the £1000 and leave zero cash because it's payday tomorrow.

But then if some disaster occurs and even by living frugally you need £10,000 to get through the next 6 months minimum expenditure, you will feel pretty foolish that the nearest thing you've got to being able to pay your next month's rent or mortgage was £1000 of cash which you had turned into £1000 of investments and which fell with the market to become £500 of investments.

People will debate what size of emergency fund you need, and whether you should talk about it in terms of x months of salary, or y months of net salary, or z months of frugal living expenses. If your boiler breaks down and your car breaks down in the same month, you might need thousands, and the last thing you'll want is to sell investments at the bottom of the market to get those thousands. And you shouldn't assume you could just borrow the money because the very reason you need the credit (e.g. I haven't got a job) could be a reason to deny you credit.

So, savings first, then investments - but most investments are liquid and can be turned back into cash at short notice, which allows you to take a risk of not having quite so much savings on hand... but only if you don't mind what value you actually get for them (could be a lot less than you paid)

Ciwan

What about investing in a home business? I watched Andrew Minalto's course, and it is really good and great value for money.

Isn't that better/safer than other investments? Or do we stick to what the Rich Dad Poor Dad author say: If you invest something that involves you working there, then it isn't an investment.

bowlhead99

Ciwan wrote: »

What about investing in a home business? I watched Andrew Minalto's course, and it is really good and great value for money.

Isn't that better/safer than other investments? Or do we stick to what the Rich Dad Poor Dad author say: If you invest something that involves you working there, then it isn't an investment.

Some of the richest people around, got there by starting a business which they invested all their time and effort and spare cash into. There are also a lot of people who did that and went bankrupt or ended up with no real return on what amounted to a lot of hours for less than minimum wage.

Minalto as an 'online entrepreneur' is definitely doing something right - as others have done - by finding a formula where you can monetise a 'how to' guide which you've already written, sell it over and over again to more and more people and advertise your business coach credentials to sell more and more courses and consultancy and events and so on. One presumes he makes more from telling people what to do than actually doing it, and if it works out for them then he is a hero and if it doesn't work out for them and they don't make their $100k/year in their spare time, he can say they just didn't apply themselves well enough and he's already got their $100. On to the next sucker.

If there was some true awesome 'trade secret' he would not want to sell it, so he's basically just selling his common sense and experience to everyone who wants to listen.

Generally investing in yourself (qualifications, skills or a proper unique business for which you have an aptitude) is a sound first step before trying the financial markets. But putting your money "to work" buying stock or advertising for a business is pretty risky compared to buying investment funds. Sure, if you have your own little business and do well at it, you can make a living. But when it goes wrong, you lose your job and your invested money. And if you are doing it part time because you have another real job, you are maybe not giving one of them the focus it needs and most people will fail to make that work.

enthusiasticsaver

I just read everything I could get my hands on, although I have not read the Tim Hale book but I took the lazy approach to investing and just went for one multi asset fund which matched my risk approach - Vanguard Lifestrategy 60 which is a popular fund on this forum. As Bowlhead says - make sure you have sufficient cash reserves as one thing I do know about investing is that you do not want to withdraw when the market is low as that cements losses. My portfolio is about 3% down on last January but luckily I have sufficient funds in current accounts for it not to be an issue. We are approaching retirement in the next three years so we actually have two years worth of expenditure and our lump sums will cover four years expenditure with the aim we will not need to touch the portfolio for at least ten years from now.

I don't think it really matters how much you start with. I initially started with a £250 monthly payment into the fund I had chosen but then when a matured fixed term cash isa finished in April 2015 I transferred the lump sum across (this is actually the main reason for my drop in portfolio value as the market was high then). After April I increased the monthly payment to £500 per month and have kept it at that since, no more lump sums. Most funds will let you invest from £50 minimum. The main thing is not to keep chopping and changing funds as you will incur lots of charges.

Ciwan

If I don't ask, I'll hate myself for not asking later!

What is a Cash ISA? And what does it mean for it to be matured?

Thanks

Archi_Bald

A cash ISA is a savings account in a tax wrapper. I.e. you don't pay tax on the interest - but that's been quite irrelevant for some time now as the cash ISA interest rates have been terrible, and you can make more money from saving in accounts that pay taxable interest.

One exception is the Help To Buy ISA which is a very special form of a cash ISA, only relevant for First Time Buyers. Ask for more info if you qualify.

S&S ISAs are tax wrappers for investments, and definitely worth having for investors as all dividends and growth is tax free.

Ciwan

Thanks Archi, I didn't think the government would tax my cash if I had placed it in an account and left it to accumulate interest. Shows how much I don't know!

I have a Savings account with Barclays, I don't think it is an ISA, I'll have a look tonight when I get home to find out how good that savings account is.

Reaper

Ciwan wrote: »

The past month or so I've been reading Rich Dad Poor Dad...
Do you know of any books or learning resources

Avoid the Rich Dad Poor Dad seminars which are little more than scams designed to part you with your cash. There have been TV documentaries about them.