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What prompted you to start investing?
Interest rates on savings accounts were so rubbish!
I’d survived several years of rock-bottom interest rates by stashing my cash in a fixed-rate individual savings account (Isa) at 4.15%.
But when my interest dropped as low as 1.25%, I started looking elsewhere. Also, I finally realised that I viewed the money in my Isas as part of planning for retirement. With retirement a good 20 years away, it made much more sense to invest in the hope of higher returns.
Over the past 116 years, on average shares have beaten cash 99% of the time when investing for as long as 18 years, according to the Barclays Equity Gilt study 2016.
The stock market was riding high early last year, so buying stocks and shares would have been expensive. I waited until after the markets plummeted in August, making prices cheaper, before finally taking the plunge.
What had you done with your money before you started investing?
I searched for the best rates on cash Isas, high interest current accounts and regular saver accounts, with occasional payments to my stakeholder pension.
Why hadn't you invested before?
As a money journalist, I had written too many articles explaining that no-one should invest money they couldn’t afford to lose.
I was all too aware that it’s possible to get back less than your initial investment, if the company goes bust, or you have to sell shares when the market has dropped.
Also, the stock market is only really suitable when investing for at least five years, and ideally longer. This meant I was only prepared to take a punt with extra money, after we’d set aside enough to cope with emergency bills like the boiler blowing up.
How did you choose what to invest in?
Single companies seemed too risky, as I wasn’t confident I could avoid the next Northern Rock or Volkswagen.
Instead, I prefer pooled funds, where a professional fund manager spreads investors’ money across a whole range of different companies, countries and assets.
Past performance is no guarantee of future success, but I didn’t want to hand over my hard-earned cash to a flash in the pan.
Instead, I was looking for funds with a long track record of successful investing, a long track record with the same well-regarded fund manager, a long track record of paying rising dividends, and all for a low cost.
What research did you do?
I liked the idea of investment trusts, because historically, they tended to charge less and perform better than more popular unit trusts.
I also knew that the investment trust sector includes not only funds that have survived and thrived for more than a century, but also funds that have increased their dividend payouts for more than 20 years in a row.
I therefore asked a financial advisor to look at the list of “dividend heroes”, available from the Association of Investment Companies. He picked out three – City of London, Scottish Mortgage and Temple Bar - and added a fourth: Finsbury Growth & Income.
These four investment trusts may have different investment approaches, sectors, yields and dividend track records.
However, they all have ongoing charges under 0.78% a year, and all have managers rated gold by Morningstar.
How much did you put in to start with?
I split the proceeds of my cash Isa equally between the four different investment trusts, so started with £7,100 in each, after dealing costs and stamp duty.
What do you think the industry could do to make investing easier for people?
Change the language. The industry and media use so much jargon and so many technical terms, it’s really hard to get your head round. I hope to make a difference by writing more about my own investment journey on my blog.
Progress since, if needed
I finally bought my investments on September 25 last year.
After a year, the £28,600 from my savings account had grown a whopping 17% to £33,600, pushed up by the post-Brexit falling pound.
Realistically, I can’t expect anywhere near this performance in future. In the long term, I’m keeping my fingers crossed for 6% to 8% growth a year, from a combination of dividends and growth in the share prices.
Now I’m eyeing up another investment trust like Murray International, to spread my money further round the world.
Faith Archer is an award winning money journalist, who also writes the blog Much More With Less http://www.muchmorewithless.co.uk/ about moving to the country, living on less and making the most of it.
She lives in Hadleigh, Suffolk, with her husband, Josh, 47 a charity fundraiser, and their children, Isabel, aged nine and seven-year-old George.
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Money Means is a news and information series written by independent financial and consumer journalists and experts. FSCS launched Money Means in 2016 to help give people clear and useful information about personal finance, to increase their understanding and confidence when dealing with money.