This article is from our Good Guide to Financial Wellbeing for Women, which is free to download here
1. Choose what type of investment product you want
It could be a Stocks and Shares ISA, or a Lifetime Stocks and Shares ISA (for 18 to 39-year- olds investing for a house purchase or to supplement retirement). Remember that gains from investments that you own outside an ISA ‘wrapper’ are taxable, at a rate that depends on the type of gain and whether you are a higher or basic-rate taxpayer.
2. Choose a platform, app (or a financial adviser)
To ensure that your savings work for the future of the planet as well as your own, go for a platform or app that has a sustainable investment option AS WELL AS the ISA type you are interested in.
A good place to start is our top sustainable investment platforms. EQ Investors, a Good With Money ‘Good Egg’ company, is a platform that offers Positive Impact Portfolios. These are designed around the United Nations’ Sustainable Development Goals, or “Global Goals.” They ONLY include funds that invest in companies helping to tackle social and environmental problems and avoid destructive sectors such as tobacco, arms, pornography and gambling.
Websites and apps with a sustainable investment focus are springing up everywhere. The Big Exchange (for actively managed funds) and CIRCA5000 (for passive funds) in particular are worth a look, but Moneybox, Nutmeg, Wealthify and other general investment apps also now have sustainable or socially responsible options.
Financial advisers can be expensive if you don’t have at least £50,000 to invest, but they will take a holistic look at what you want to achieve. Path Financial, Bluesphere and EQ Investors are on our list of top ethical advisers, and all three have a ‘Good Egg’ mark from Good With Money.
This means they can prove they make a positive impact on the planet and society as well as their customers and staff. Most advisers should now offer you information on ethical or sustainable options for your savings and investments (if they don’t, ask!). You can find one near you using the Unbiased website.
Your adviser’s fees may be based on a number of things: the extent of the advice you need, how much time it will take, and the size of the assets involved. Broadly speaking, advisers will charge between one and two per cent of the asset in question (e.g. a pension pot or ISA investment). You will usually find that the larger your asset is, the lower the percentage rate.
Remember, the point of taking advice is to be financially better off over the long term. So for most people who take advice, the cost will be less than the cost of doing nothing.
3. Choose an amount you can afford each month
Don’t worry too much about how much you invest at first, the main thing is to just get comfortable with the concept of investing and then get started. Most importantly, the money you invest should not leave you struggling to meet basic expenses. Crucially, you don’t need loads of money to invest – investing is NOT just for rich people!
Minimum investment amounts on some platforms are just £5 a month, though generally you can expect to put in around £50. Or, you could invest a one-off lump sum if you don’t need it in the near future.
If you have even a small amount of spare cash (spare is the key word here, if you need it for living costs or debt repayment, it isn’t spare), you CAN and SHOULD do it. The good news is that whatever amount you have, there are now options out there for you to invest it.
4. Consider moving any existing savings pots
Check out the interest you are earning on any existing savings you have. The chances are you could be making far more by investing it. However, it’s a good idea to keep some money in a cash savings account too so you can access it instantly in a financial emergency. Only move what you won’t need soon. Keep checking the interest rates on your savings accounts, as you could be earning more by moving.
5. Choose a fund, project or portfolio to invest in
Most investment platforms now offer ready-made, positive impact portfolios (so you don’t have to pick your own funds or stocks) or fund options if you want to invest in a sustainable way (with most of the information below, we make the assumption that you do).
If you don’t want to pick your own companies or funds, look for the word “portfolio”. EQ Investors offers a Positive Impact Portfolio where your money is invested in a mix of 15-20 funds.
Our latest Good Investment Review looks at the key themes behind the UK’s top ethical and sustainable funds – as well as an overview of their financial performance. Square Mile Research, which authors the review, also prepares Positive portfolios for Pennine Wealth, a Good Egg-licenced wealth manager based in Manchester.
Other platforms do not offer stock market-based investment funds, but projects that you can invest in directly.
For example, Energise Africa puts your money to work fighting climate change with ethical investments in solar energy projects in Africa, and Abundance has funds in three sectors (green energy, transition to a sustainable economy and housing) with companies that are developing solutions for a lower carbon world. If you are mostly interested in fighting climate change in the UK, you could look at Ethex.
6. Check the minimum investment term
When you invest, look to lock your money away for around 10 years. Make sure that you will not need the savings you are investing in this timeframe.
A word on risk
One phrase you will see a lot of when investing is “Capital at risk.”
The word ‘risk’ can be worrying and off-putting if you’ve never invested before or you don’t have much spare cash to set aside. The idea of losing some or all of your money (which can happen) is something that many of us just can’t, well, risk.
That’s one reason that saving in cash accounts remains more popular, especially with women who generally have less income and therefore less money to spare.
But not all investment risk is created equal – it can vary hugely depending on what you are investing in. Often, things that are “high return” come with more risk (the higher return is the reward for being prepared to put your cash at risk). But all investment will carry some. Investment managers spend most of their time trying to work out how to get the most reward for the least risk.
Some platforms go to extra lengths. Energise Africa offers a first-time investor a £100 guarantee on their capital, to encourage people to get started. The Positive Impact Portfolio from EQ Investors offers a wide range of risk profiles from ‘cautious’ to ‘adventurous plus’ so you can choose the one you are most comfortable with.
Always remember that when you invest, your capital is at risk.