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Get to grips with regular investing

In this episode, Clare discusses what you need to know about regular investing; why you might want to consider investments rather than holding cash, and takes to the streets of London to find out what the public thinks about investing.

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek independent advice.

The benefits of regular investing

Hello, I'm Clare and welcome to Smart Investor, the show to help you get the most from your investments. Although we can't offer personal advice every month we'll tackle the burning issues affecting investors. And today I'll be exploring the long-term benefits of investing regularly versus investing a lump sum. As ever, if you're not sure about investing please seek independent financial advice.

One of the biggest misconceptions about investing is that you need to have a large amount to get started. But in actual fact, you can invest from as little as £50 a month and there are a number of benefits of investing regularly. Contributing smaller amounts can be a good way of getting into the investing habit so that you can meet your long-term savings goals. And if you're new to investing, it means you can give it a go without worrying that you're committing too much money all at once. Investing every month is a good way to use your ISA allowance as you can spread out your payments over a year.

In this tax year, which started on the 6th of April you can invest up to £20,000 in ISAs. One of the main benefits of investing regularly is that you don't have to spend time focusing on whether or not you are buying at the right or the wrong time as you would if you were investing a large lump sum. As you'll be drip-feeding money in gradually, in some months, when the market has risen the amount you're investing will buy you fewer units. But when the market has fallen, the same amount will buy you more units. This doesn't necessarily mean you'll get a better return than if you invest a lump sum but it can help smooth out stock market volatility. And the technical term for this process is Pound Cost Averaging.

Remember, though, that all investments involve risk and you might not get back the amount you originally invested. Nobody can predict how and when stock markets will go up or down because so many different forces are at play. Investing on a regular basis rather than trying to time a lump sum investment can help you become a more disciplined investor, and it removes the worry that you're putting your money into the market at just the wrong time. You invest every month regardless of whether the price is high or low. It reduces the risk of you making investment decisions based on your emotions and avoids delays in putting your money to work. The longer your money is in the market the greater the chance of you reaching your goals. Ideally you should remain invested for at least five years, but preferably longer. For more information on how to get into the habit of regularly investing check out our website.

Why invest? An interview with a Barclays Investment Advisor

Clare: When it comes to deciding where to put any spare money you have it depends largely on what your financial goals are and your time horizon. And in times of low interest rates and rising inflation, which we're in at the moment it can be particularly hard to work out what to do. So to find out what you need to consider I'm joined by one of Barclays' Investment Advisors, Stacey Rowland. So, Stacey, when you're advising clients about their future goals, where do you start?

Stacey: It is about trying to work with them, to identify what their goals and objectives are. You then need to couple this with the time period in which they want to achieve them. So as an example, if you have someone who is saving for retirement the question is "When are you going to retire?", "How many years do you have until retirement?" That's where we start. We look at their goals, their objectives and time period.

Clare: So the time horizon can impact and affect what you do with your money.

Stacey: Absolutely. Time horizon with goals is exceptionally important and we tend to categorise it into two buckets, if you like. So we have the short-term goals and then we have medium- to long-term goals. Medium- to long-term goals are five-plus years. The short-term goals we tend to suggest that people remain in cash. The medium- to long-term goals is where cash perhaps isn't the best option for you.

Clare: And why is that?

Stacey: As you said yourself, you've got inflationary environment, low interest rates. Holding cash can actually reduce your purchasing power that you might have in the future. And that can actually hinder you from potentially achieving your desired objective.

Clare: So when it comes to longer-term goals, should everybody consider investing?

Stacey: Every client is different. All of their objectives are different, their comfort level with investments is different. But every time I sit in front of a client, when they have a medium- to long-term goal. I absolutely recommend that they start considering investments to get invested, to stay invested and just sit back and wait.

Clare: Thank you, Stacey, that's been really helpful. Thank you. And of course for more information on how to become a better investor check out our website.

What do the public think about investing?

Clare: Speaking to the people that matter we took to the streets of London to find out what you know about investing and how you go about managing your money.

Person 1: No, I've never invested before. I'm just not interested in it. I've never learned about it at all.

Person 2: I would like to. It's something that I'm actually beginning to look into. But to be honest with you, I haven't really had the capital.

Person 3: I can't say I'm very active at it. I'd like to be more. I probably am not more active because I spend most of the money I have even though I know that's a bad thing to do.

Person 4: I'm in the situation where I don't have a, you know, final salary pension so I have to invest into a pension fund to have a pension.

Person 5: It's for the future. It's nest eggs, have multiple nest eggs in different places. Given the economies that we know today it's better to be safe and spread it all around in different investments.

Person 3: I think it's smart. You can make more money by doing that rather than just keeping it in a savings account.

Clare: Some interesting insight there. And of those we spoke to who don't currently invest there seems to be a feeling that they should be doing more. This is very common when it comes to managing your finances whether it's day-to-day bills or longer-term planning and given how busy we all are. It's understandable why this isn't often top of the priority list. However, it's well worth taking some time to review your finances and think about your goals and aims. If you have a clear goal, it's much easier to start taking action to maximise your chances of achieving it. If you want to find out more about what steps you should be taking as an investor visit our website.

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