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When I started investing, I had no idea. I was in my mid-twenties, living in a rented flat in Cambridge and working my first marketing job since university earning £21,000 a year. With student loans to pay off and a desire to have fun (now I finally had some money), saving for the future wasn’t high on my agenda.
When you’re young you don’t think about being old (or at least I didn’t). I remember as a child thinking that my grandmother was old (probably in her early 50s) and that retirement was so far away that I didn’t even understand the concept or how it would apply to me.
I remember my dad (who had his own retail business) talking about taxes and knew it was something I should know more about.
Since I had just started working full time in a proper “career” job, I was paying taxes for the first time. I admit that the number of deductions irritated me. After student loan payments, national insurance and taxes, my net income home was much less than my gross and I felt a little robbed.
How could I keep more? And that’s where the tax-free part of the Isa tempted me. Since I’m not a gambler, I wasn’t sure how it would turn out, but I thought I’d try £25 a month, the amount I was willing to lose, to keep more of my money.
Pay yourself first: The mantra has worked for Samantha (inset) and she can now afford a Lamborghini
Investing in stocks and shares wasn’t really a topic of conversation with my friends or family, so I didn’t tell anyone what I was doing.
At the beginning of the millennium, there weren’t that many providers online, so I chose the website that was easiest to use, which in my case was Fidelity.
The first fund I chose was Marlborough Special Situations, which said its objective was to increase the value of your investment, which is pretty standard fare.
It had worked well, but I heeded the warning that past performance is no guarantee of future results and set up a standing order of £25 a month.
And then I put it out of my mind. I had read that investments shouldn’t be monitored too often, as people can react badly when the stock market goes down, so I followed that advice.
It was about seven years later when I checked the account, probably prompted by a news story, and was shocked to see it had more than £4,000 in it. I couldn’t believe my 25 pounds a month had increased so much.
I was still a novice at the time, and only later learned that by always investing £25 a month, I was doing something called “pound-cost averaging”. That means that regular investments smooth out market fluctuations and you get an average purchase price over the investment period.
When I saw the size of my tax-free fund – which was enough to buy a decent second-hand car – I decided I didn’t want to gamble anymore and it was now a sum I wasn’t prepared to lose.
Being clueless was no longer an option, so I read finance books on how I could grow my money. When I originally purchased my fund, I didn’t pay much attention to the fees being charged, only the performance of the fund.
He had an actively managed fund, meaning he was paying an expert fund manager to pick and manage the stocks.
Then I switched to a passive tracking fund because they had much cheaper fees, less than half of one percent. Passive tracking funds simply track the performance of different investments in an index rather than a person who manages them. I learned that these funds often perform as well (if not better) than actively managed ones, so I decided to save on fees.
Choosing a fund is scary but also exciting, and I found the charts on Fidelity’s website really helpful. I liked comparing the performance of funds over different time periods because you could place up to 15 funds and then it was visually shown how it performed over time and how much a £1,000 investment would be worth.
It seemed like magic money to me, so I increased my monthly investment to £300 and started reading more.
My next lesson was that as an investor, I had an “internal bias.” It means that as I live in the UK I am more likely to invest in UK stocks and shares rather than diversify and invest according to the global economy.
So I looked for funds that better reflected the global economy, increased my standing order to £500 a month and bought more passive trackers. This time I bought Vanguard FTSE Developed World Excluded UK; Vanguard LifeStrategy 40% Equity and Fidelity Index Emerging Markets.
Then a couple of years ago, over lunch in a pub with a friend, the topic of investments came up. I mentioned the Isa I had.
That’s when I learned my next big lesson: check the platform provider’s fees. I had always been a loyal Fidelity customer, but my friend told me that I was paying a percentage fee on my investment and, due to the size of my portfolio, I should look for a provider that charged a flat monthly fee.
They had recently moved to Interactive Investor. I was really worried about moving since I had been with Fidelity from the beginning, but switching to a flat-fee platform would probably save me thousands of dollars. I couldn’t afford to remain loyal, so I changed.
It’s been almost 25 years since I started and, hand on heart, I never realized I was investing. I am now 49 years old and I can say with certainty that compound interest over time is a miracle. My standing order is now £650 a month, but I wish I could maximize the annual Isa allowance of £20,000.
I have learned that I am not a good individual stock picker. I was pretty sure that Rivian (an American manufacturer of electric adventure cars) would set the world on fire, but right now I’ve lost 73 percent of my initial stake. I won’t sell it because I hope it arrives well over time.
I do not deny that there have been lean times and when that happens I reduce my monthly investment, but no matter how short it is I will always invest something.
“Pay yourself first” was a key mantra in investing books and it’s really important to maintain a regular routine.
I haven’t touched Isa and have no intention of doing so for years to come. It still amazes me how much it has grown (almost £200,000) and in some ways has acted as a safety net. If things get tough, I can pay off my mortgage or top up my pension in the future. I have more interest in what I am investing. Like Baillie Gifford Positive Change (0.53 per cent fee), which contributes to a more sustainable and inclusive world.
I never dreamed that I would end up with such a decent amount of money. My advice to potential investors? Get started now. Do little and often.
Have no fear: the weather is very forgiving. And when I finally get my money out, I hope to buy my childhood car: a Lamborghini!
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