Hood’s resident financial columnist, Rachel Stewart, takes a deep dive look at the world of women and investing. Read the first two articles on the subject below, and keep an eye out for her third and final instalment in the November/December issue of Hood—out soon.

ARE YOU INVESTED? PART THREE

This is my third instalment uncovering the secrets of investing, and debunking some financial myths—if you missed the previous two features, scroll below to read them in full.

Are You Invested? Hood series with imagery from Jen Theodore via UnSplash

So far, we’ve covered the human behaviours that can get in the way of us saving for our and our families’ future. Then, we moved on to my golden rules of investing. In this article, we’ll be talking about the power of compounding; something that Albert Einstein reportedly called ‘the eighth wonder of the world’, so it’s clearly worth taking a look.
There is an old Chinese proverb that reads; ‘The best time to plant a tree was 20 years ago. The second best time is now’. I love this quote. Essentially, planting a tree 20 years ago, having patience, and watering it regularly will mean you can reap the rewards in time. If you are choosing to start today, the critical thing is planting the seed—taking that first step.
So, what impact does delaying your saving journey have? Well, the longer you put it off,
the more you’ll miss out on the power of compounding returns and, therefore, the harder the journey you will have to reach your goal.
If you think about it, most people understand the importance of paying off debts to avoid the interest stacking up. But the concept of compounding is often overlooked by those who need to create wealth for the future. It’s a marathon, not a sprint.
Compounding rewards those who invest over long periods (five years at least), just as I spoke about my last column; My Golden Rules of Investing.
Whatever your age, the secret of investing success lies in the way that investment returns themselves generate further gains—this is the power of compounding. Reinvesting any income generated, rather than paying it out, means that returns in the next year are earned on the sum initially invested, plus the income accumulated in the previous year. It’s very much a snowball effect; once it’s rolling, the more snow it collects and the bigger it becomes.
By getting into the habit of saving and investing earlier, committing to a plan, and giving your money the chance to grow, a more secure financial future can be yours.
If the thought of stepping into investing still terrifies you, it helps to think of it like this. You are walking down the road and see the house of your dreams for sale. You rush home to look it up but find it’s financially out of your reach. But then, the following week, there is a media frenzy about a crash in the housing market and, subsequently, house prices are down. Suddenly, you find the dream house, which was previously destined to remain a dream, is now within your budget. Would you walk away? Would you think to yourself; ‘I’m worried about the housing market, so I’ll just wait until the prices have risen again and buy then?’ No! You would very likely be fighting tooth and nail to buy your dream house. Investing is no different. The idea of perceived safety is something I touched on in my previous arctics, so do give them a read to find out more.
Coming back to this article; to put it simply, the time is now.

As always, if you want to have a no- obligation chat about your financial position, please get in touch. I cover the whole of the UK, and you can find more articles and videos on my Facebook page, @traprainfinancial.

An investment in equities does not provide the security of capital associated with a deposit account with a bank or building society. The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.

ARE YOU INVESTED? PART TWO

This is the second in a series of articles around the concept of investing. My previous article explores the pesky human behavioural aspects which can stop us from planning our financial futures. This article, however, takes us to the next level. I will be exploring some key aspects to think about when beginning your investment journey.

Before we move on, let’s talk about those human behavioural aspects I keep dwelling on. These biases can keep rearing their heads when we don’t realise it. They can trick us into saving less, spending more, and becoming overconfident—Amazon habit anyone?! But what do these biases look like?

Anchoring Bias: This is where we rely too heavily on a single source of information and do not analyse each option on its own.

Loss aversion bias: We have a hard-wired instinct to play it safe to avoid losing money, and this may prevent us from reaching our long- term goals.

Present bias: We value instant gratification over future rewards. This psychological bias can trick us into saving less, spending more, and not truly acknowledging our financial state.

In this time of turmoil, where many are wondering what their future holds, it can seem a strange thing to be thinking of investing. However, while we are all reassessing what is important to us in life, it is a good time to re-strategise our finances and make sure that we aren’t losing touch with our future hopes, plans, and dreams.
Choosing not to invest your money also carries risks—in particular, the spending power of money reduces over time due to the effects of inflation. Those of you reading this with cash holdings and/or cash ISAs should take note of this. The key to successful investment is not to avoid risk entirely, but to instead find an appropriate balance of risk and reward to help you meet your investment objectives.

Here are my four golden rules of investing:

• Ensure that you have sufficient cash easily available to meet your short-term needs, including allowance for emergencies.
• Take a clear view of the time-frame for which you are able to invest your money. My view—at least 5 years.
• Don’t overlook the impact that inflation can have on the spending power of your money.
• Spread your investments across a number of different asset classes and investment managers, to reduce the danger of all your investments falling in value at the same time.

You should never be in a position where you have to sell long-term investments at a bad time. There is no set rule on how much you should keep liquid and accessible. It depends on each person’s individual circumstances and also their attitude to risk.
The weird thing about investment planning comes back to comments made in my previous videos about human behaviours—perception that market safety happens when it’s actually most risky, and vice versa. Seeking appropriate advice can help you to reach your goals and plan your finances effectively—the only way to predict your future is to create it.
For more expert financial insight, visit my Facebook page, Traprain Financial, and look out for the third instalment of my investment series in the next issue of Hood, out mid-November.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested. An investment in equities does not provide the security of capital associated with a deposit account with a bank or building society. The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependant on individual circumstances.

The Partner Practice is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the group’s wealth management products and services, more details of which are set out on the group’s website Sjp.co.uk/products. The titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.

ARE YOU INVESTED? PART ONE

It may seem strange to be speaking about investment planning just now. When you live in volatile and uncertain times, should you put your long-term financial plans on hold? What we’ve been experiencing these past few months can make the task of planning for you and your family’s future feel pretty daunting. But it’s important now, more than ever, to make that connection with your future self, and plan and prepare where you can.

HM Revenue and Customs’ statistics updated on 25 June 2020, showed that women still favour cash ISAs over stocks and shares ISAs*, while a separate study by YouGov Omnibus** found that 52 per cent of UK women said they had never held an investment. What is it that is stopping women taking the plunge into investing? Is it a conscious choice? Why are we so hesitant to plan for our futures? How are you funding those dreams of university for your children, buying that house, building that extension, going on that dream holiday?
If you are saving, is it in the right place to achieve your objective, or are you subconsciously letting the spending power of your hard earned money erode with inflation over time in cash savings?
An acronym I heard recently fits this situation really well. Apparently, it stems from the US Military. It’s known as VUCA.

VOLATILITY
The markets can be a faceless monster; consistent negativity in the media can make it seem impossible to navigate. I feel that this negativity puts people off—perhaps waiting for the good news to come.

UNCERTAINTY
If you do venture online to look at anything, it’s information overload and it can be impossible to weed out what’s relevant and actually useful.

COMPLEXITY
In modern-day life we all have countless commitments. Keeping on top of everything in our lives is already a full-time task.

AMBIGUITY
There are so many conflicting opinions about what to invest, where to invest it, and conflicting articles to read. How do you wade through it all?

The result of all this VUCA boils down to the following—do you DIY invest, seek guidance, or look for professional financial advice? Do you know your ISAs from your pensions and unit trusts, and how do you choose? Where should you invest? In equities, bonds, or property? And should you seek out active managers or passive funds? The result of this VUCA is that we just... Put it off!
If you take anything away from my columns, please just take the time to review your financial position. Assess your financial objectives and how you are going to achieve them, and then reassess regularly. As I always say to my clients—the only way to predict the future is to create it.
I’ll be talking more about investment planning in my next column. History is on our side when it comes to investing in comparison to holding cash, so stay tuned. As always, if you want to talk about your financial position, please don’t hesitate to reach out to me on my website, Traprainfinancial.co.uk.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested. An investment in equities does not provide the security of capital associated with a deposit account with a bank or building society.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

*Gov.uk/government/statistics
**YouGov.co.uk - Matt Palframan, Director Financial Services Research 2018