Some 9.8m people over 50 own shares and with studies showing shares nearly always beat cash in the long term, you can understand why we’re willing to take on additional investment risk to boost our finances.
Is stockmarket investment for me?
But before you consider investing, ask yourself the following… How long and in what do want to invest? How much can you afford to invest? How much risk are you prepared to take? Are you happy to invest for a longer term to smooth out stockmarket ups and downs?
For stockmarket investment to work, you need to accept that the value of your money would fall as well as rise. If a fall would keep you awake at night, this isn’t for you.
What is a share?
Shares are traded on stockmarkets around the world. For example, the London Stock Exchange’s best-known share index is The FTSE 100 which is made up of the UK’s 100 largest UK companies including Marks & Spencer, Next and Tesco. Put simply, a share is an investment in a company. In return for your investment, you become a part owner in the company along with other shareholders. You'll share in the company's fortunes, including a dividend payment if the company does well, but this isn’t guaranteed.
How to buy shares
You can buy shares yourself and the cheapest way to do this is via an online execution-only share-dealing service, such as Halifax Share Dealing and Lloyd’s Bank Direct Investments, which means you choose not to receive professional advice and pay around £5-£12 a trade. When it comes to deciding which shares to buy it can be as simple as reading the papers and using your common sense for instance, seeing how busy your local M&S branch is. Holding shares in just one company is high risk though, because if the company gets into difficulties you could lose your money.
Is a fund for you?
A safer approach is to pool your money with other people in a collective investment known as a fund. Funds suit many first-time investors as it spreads risk by investing in a number of companies’ shares and the fund manager makes all the buying and selling decisions for you. If you like this idea, a stocks and shares ISA works well as the returns are tax free.
You can also buy, sell and hold shares or funds through a low-cost investment supermarket fund. Your account is usually run online, but some offer a phone service and you can put your investments inside a tax-efficient wrapper such as an ISA.
You could either opt for a fund run by a manager with a good track record, such as the CF Woodford Equity Income (charges from 0.6% a year) or a cheaper approach is a tracker fund which follows the FTSE All Share index such as the Legal and General UK Index and costs from just 0.1% per year. Many investment supermarkets offer virtual portfolios allowing you to try before you buy.
If this is your first investment, start slowly by investing £50 a month until you are more confident in the markets. Investing in shares can be complex, so get some professional financial advice first.
Join the club
Investment clubs are a fun way to learn about shares. Share buying and selling decisions are made by a group of friends or colleagues at meetings so you can find out more about the stockmarket while only investing a little and enjoying a social get together. There are currently 12,000 clubs in the UK.
The HL Vantage Investment Club service provides an easy way for investment clubs to research, invest and keep track of their portfolios, with online valuations, and stockmarket information freely available. Your club will need a constitution, to vote in key members such as a chair and secretary, and an account to deposit members’ subscription money, buy shares, and receive dividends. Proshareclubs offers useful tips on starting and running a club.
- Words by Yours money editor, Sarah Jagger
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