🤦🏻‍♀️The Real Reason Not Enough of Us are Investing & Why it’s a Bigger Problem than You think

While the pandemic has seen a record number of newbie investors; with 1 in every 10 Brits starting to invest for the very first time in lockdown (yippee), these numbers just aren’t cutting it. Only 3% of the UK population currently has a Stocks & Shares ISA (tax wrappers allowing you to invest up to £20k p/yr earn profit and income, tax-free). It needs to be higher. A lot higher. 

We’re all living longer (well into our 90s) and if you aren’t investing for your future, who’s gonna fund it? You can’t rely on the gov. The way things are going, they keep on raising the retirement age. By the time I retire it’ll have risen to 76! While interest rates are rising, they’re the highest they’ve been in 15 years (at 4% now), banks still pay me a pathetic 0.6% on my current account while they’re busy lending it out 10X that rate. Savings will only get you so far. You need to be investing your money so that it can grow.

From what I’ve seen, a lot of people are just too scared to invest. More than 30% of young adults in the UK are still afraid of losing money when investing so they just hold off from doing so. Germany is even worse! They’ve got 3 trillion euros simply sitting in deposits which means that German consumers are willing to lose money in real terms every single year (thanks to inflation being higher than interest rates) ) rather than take the risk of investing it. 

Does gender explain why more of us don’t invest?

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Let’s look at the numbers. They tell us in black and white that more women than men are too scared to invest. With 49% of women saying they’re scared of losing money compared with 30% for men. What’s more is that when it comes to not knowing enough about the stock market, more women (42%) than men (25%) said this is a real barrier to investing. It could be that women just don’t feel like finance speaks to them. Well ladies, I’ve got your back! 

More men than women typically invest because after all finance is one of those things that men turn to. It’s a stereotype that’s been around for ages yet still exists. It’s like an elite boys’ club. Women can feel so intimidated by the mere mention of markets and numbers. The industry is also still dominated by men which doesn’t really help things.

But women are made for finance. We’re cool, calm and collected and we’re also more likely to underestimate our abilities which means we’ll do more research – more than we actually need to. And this is a good thing! So forget about all those voices inside your head telling you you can’t. Because you totally can! Whether you’re a man or a woman, investing is for You. It’s for everyone, Don’t ever tell yourself otherwise.

Don’t be so afraid

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Even if people do end up investing many are still too scared to take on some risk that their portfolios end up in areas that are too safe for their age. I recently started my first job (well almost 7 months ago actually!) and I jigged around with my stock/bond allocation for my workplace pension. Psst: read here the 1st thing you should do with your paycheck!

I changed it to 100% equities. I’ve got decades ahead of me, why would I waste these precious years being in stuck in bonds?! But people don’t really understand it. They just sign a bunch of stuff from HR and don’t really question it.

Perhaps they aren’t questioning it before they don’t understand it and feel intimidated or because they don’t understand the importance of being invested in the wrong asset class for your age!

So, have a look what your pension is invested in and whether that makes sense for your given age. If you’re unsure what the heck it’s talking about – ask someone to explain it to you. Maybe have a chat with your line manager or a family member or friend who understands the things! Whatever you do, don’t do nothing.

Start slowing down on stocks before your seventies

If you’re gearing up for retirement it makes total sense to start shifting your portfolio out of high-risk assets (stocks) into lower-risk assets (bonds). But if you’re saving for a deposit and you have some time ahead of you (at least 10 years), then how else will you be able to grow your money if not by taking on a little bit of risk? 

Though if I’m honest with you, since we’re all living way longer maybe having loads of stocks in your seventies isn’t such a bad idea after all! But it’s a personal decision and no 2 people will think the same. (Psst: read here why you must talk money before marriage!)

You’ve gotta be comfortable with the level of risk you’ve taken on. If you find yourselves checking your portfolio every hour, it’s probably a sign that you’ve taken on too much risk! By sticking your money in funds you’ll find you’ll get your peace of mind back. And if you aren’t investing more than you can actually afford to lose, then you’re good to go. 

Remember there’s a risk in everything. There’s a risk to not investing as well as investing so choose your kinda risk. I’ll take the risk of investing any day. The alternative is 10000X worse.

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More risk, more reward 

You can’t expect to be invested in super-safe areas (like bonds) and still reap massive rewards! Those who take risks are often rewarded. Otherwise where would the incentive be? Read here the hidden price you’ve gotta pay to get the rewards from investing.

Think of a VC who invests money in very, very risky companies right at the beginning of their growth stage. Now would they take all this risk given that 1 in 10 start-ups fail if there weren’t even the slightest possibility of a massive pot of gold at the end of the rainbow? I seriously doubt it. 

So let’s shift our mindset and our attitudes toward risk because if we aren’t willing to take on much risk, then we won’t be left with many returns at the end of it all. And trust me, that will hurt. 

I was recently speaking to a friend of mine about investments and pensions and she told me how she wished she had taken on more risk in her personal pension pot. Okay, she still has some time ahead of her till she retires (10+ years) but here’s the thing, she’s been investing for over 20 years and realised that she could’ve taken on a whole lot more risk to boost her nest egg. Something tells me her attitude toward risk has changed now!

You’ve gotta take it all; the good and the bad  

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I think most people are afraid of losses more than they enjoy the wins. And that holds then back. Hear me out. If you lose money on a stock it’s pretty painful. You agonise over it and it’s not a fun experience. Granted. But when you make that exact same amount, does it feel as good as it felt bad? Are you that excited about it? For many, this answer will be no. And it’s 100% natural. 

It’s for this reason precisely why people will either shy away from investing in the stock market altogether or take on such low risk that they’re not even giving their money a chance to grow. 

We’ve gotta be able to take the ups with the downs and learn to be OK when you lose.

Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.