5 things nervous beginners should know about investing 

Written by Charlene Cranny on 1st Jun 2021

Before working in sustainable finance, I didn’t see ethical and sustainable investing as something that was available to me. I now know differently. If you have been feeling unsure or confused about it, here are some reasons to consider taking the plunge.

1. Investing is for everyone

I used to think stocks and shares were for privileged white men that had studied finance and liked to read market data in the Financial Times. Not so!
There is now a whole range of investment platforms that allow anyone to invest as little as £5 to £50 – while speaking to us in everyday, non-gobbledegook language so you can understand exactly what is happening to your money at any moment.

2. Investing is not as scary as you think

The industry uses the word ‘risk’ a lot to protect us. Because investments do go up and down and profit can’t be guaranteed. But how big is the risk?
According to the 2019 Barclays Equity Gilt Study, for the last 120 years, any two year investment in stocks has had a 69 per cent chance of doing better than leaving cash in the bank. This goes up to 91 per cent if you leave investments untouched for 10 years.
So, you can expect the stock market to earn you something, most of the time. And the longer you leave investments alone the better. Aim for at least five years. In terms of what you can earn, the average stock market return is around 10 per cent a year. Here is a useful calculator.  Try starting small to watch the ups and downs for a while to get comfortable with them.


3. Investing could help women and ethnic minorities increase their income

Men have 40.3 per cent more pension income than women. Meanwhile, private pension wealth for Bangladeshi, Chinese, Black African and ‘Any other ethnic group’ households was less than £5,000, compared to £80,000 for White British households in 2016-18. Worse, 35 per cent of 2000 British adults surveyed in 2018 say they don’t have a pension at all.
I would really, really love to see more women, people in ethnic minorities, and those on an average income investing to start catching up with privileged white men.


4. Investing can change the world

I’m only interested in supporting the growth of clean, green and kind companies with my money. Which is why I choose investments and pension options that are ethical, sustainable and have a positive impact. Thankfully, there are increasingly more investment platforms and pension options like this available.
Big changes can also happen when you own shares in ‘bad’ companies too. Last week was an unbelievable example of investor action.
Shell is being forced to reduce emissions 45 per cent by 2030 in an historic legal ruling brought by shareholders and others. Chevron shareholders voted for targets to reduce carbon emissions – against management advice. And at least two climate-loving activists were elected to Exxon’s board.


5. Investors are incredibly powerful change makers. You can be one too.

But it still gets confusing. I had no idea there are so many different ways to invest (investment strategies). It is worth knowing them to ensure your money is as clean, green and kind as you expect.
Let’s say your fund or portfolio has 100 companies in it. The fund manager could choose those 100 companies in a number of ways. They might:
  1. Exclude whole industries like tobacco, while any other company or industry is fine even if questionable.
  2. Choose 100 companies that have a positive impact in one particular area like gender equality or clean water.
  3. Choose 100 companies that offer a solution to more than one social or environmental issue like homelessness and climate change.
  4. Choose 50 companies that score well on environmental protection compared to others in their industry (i.e. less bad) and 50 that don’t score that well but are profitable.
  5. Choose 100 companies without checking their environmental or social scores.
And so on! So it’s always good to ask exactly what your general investment, ISA or pension means when they say they use ethical, ESG, sustainable or impact strategies.
These are some of the reasons I started the brand new project ‘Economy for Good’. I want to share everything I know about ‘good’ money with you so you can be even more confident you are not only on the side of a clean, green and kind world but on the side of your future wealth and wellbeing too. Join the community over at economyofgood.co.

Don't miss the good stuff!

Sign up for the newest and best green money deals in your inbox every week