4th July 2014 at 2:47pm
Like many of you, I’ve just used some savings to book my family’s summer holiday in Turkey –
waterslides everywhere, so at least two of the four of us will be delighted! But when accessing my savings, I was surprised at how little interest I’d been getting. This gave me the nudge I needed to move some more of my savings out of my bank account and invest them instead.
You also might be frustrated at the low rates you’re getting on your savings. But if you’ve never invested, diving in at the deep end can be intimidating. There are complicated concepts to get your head around and seemingly endless jargon – aren’t there?
Is there really a big jump between saving and investing? Is there nothing to help bridge the gap? If you’re interested in investing but frightened off by what lies beneath, read on…
What’s the difference?
Before we go on, here’s a quick definition of ‘saving’ and ‘investing’:
- Saving [sey-ving]; noun, putting money under the bed to earn practically no return
- Investing [in-vest-ing]; noun, trying to get a better return by taking risk – like betting your life savings on a horse race
Tongue in cheek, yes. But in my experience, the above descriptions aren’t far from how many people see things. Who can blame them? Financial disasters make great headlines. Meanwhile, the millions of people securing a great future by investing wisely don’t make the editor’s cut. Success stories and a sense of perspective around investing tend to be absent.
Hopefully I can offer some…
How big is the gap really?
Most people believe there are huge differences between saving and investing, and in one way they’d be right – the highest risk investments are quite a long way from cash!
But there are hundreds of options in the middle. So which might be suitable for the ‘toe dipping’ types?
‘Toe dipping’ investment options…
The really cool thing is that these days you don’t need a PhD in finance to get involved. It’s possible to choose investments that don’t require a lot of input from you, and that suit the amount of risk you want to take.
Top among these are funds you can invest in where an expert manages your money, focusing on keeping it at a certain ‘risk level’.
That means they deal with the difficult bit (and deal with all the jargon around ‘asset classes’ and ‘diversification’ and ‘stockmarkets’) for you. All you have to do is tell them how much risk you’re prepared to take. And if that’s only a little, then they’ll only take a little. Even better, if you want to take a bit more risk or a bit less, it’s easy to change.
If you need some help on how much risk to take, there are plenty of tools/guides to point you on the way.
Worried about this costing a fortune? Fear not – as these funds are investing on behalf of lots of people they tend to be very large (£billions). This means there are often discounts which are usually passed onto you.
So why not think about investing in a low-risk version of one of these funds? You might be the type who will never dive into the investing world, but that doesn’t mean you can’t enjoy a paddle every now and then.
Which is exactly what I’ll be doing next week when the kids drag me on every water slide in Turkey.
On that note, happy holidays everyone…
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