What I've Learned in Back to School Week


Yes, this week, as the country makes its way back to schools and offices, we’ve gone back to investment school to cover off all the basics. In a year of heady highs (tech stocks) and brutal lows (pretty much everything in March), the crucial role that investment plays in all our finances has never been clearer.

Now is as good a time as any to brush up on your investment nous, whether it’s reminding yourself how to build a portfolio, checking in to see whether you’re with the best value fund supermarket, or settling down with a cup of tea and a good investment book.

We hear so often from the experts about all their excellent investment decisions (no one wants to talk about the mistakes ever, do they?) that finding out the hard lessons people from around Morningstar have had to learn along the way might provide some comfort for anyone still feeling bruised from this year’s sell-off.

And if there’s one other thing I’ve taken from this year, it’s that sustainable investing isn’t going anywhere. Anyone who said ESG funds only performed well in bull markets has been proved well and truly wrong in 2020, as have any naysayers who predicted that investors would take their money elsewhere when the going got tough. If you’re still unsure how to combine your world view and your investment pot, our guest host Isla Shaftain has saved you some time by asking analyst Elizabeth Stuart all about it.

Whether you’re a seasoned investor or a newcomer to the stock market, I do hope you’ve found something to help you from our Back to School Week. If 2020 has taught us anything it’s that you never can predict what’s going to happen next in the investment world, all you can do is keep looking and learning (and keep putting money in the market).

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Never Too Young to Start

It might seem crazy to be picking out a fund supermarket at the same time you’re picking out baby names, but it really isn’t. Kids born today are facing a huge financial wall to climb: whether it’s the average student debt of £36,000 or the average UK house price of £224,000. If you want to help your children or grandchildren scale that wall, there’s really no such thing as starting too soon.

If that’s got you feeling a bit downhearted – don’t be! Investing for a young children brings so many opportunities. Firstly the chance to ramp up the risk and add some spicy investments to their portfolio that might not be appropriate for your own rainy day fund – after all, there’s at least 18 years before they’ll be able to access the cash, plenty of time to ride out the ups and downs. But also the opportunity to get your youngsters interested in investing.

If you can make checking in on a portfolio, looking through lists of holdings and reading fund manager updates and “normal” activity for your kids from a young age, there is a far greater chance that they’ll continue the habit into their own adulthood.

It might not be as exciting as the latest gadget or toy, but a decent financial education is undoubtedly the best gift you could ever give a young person. You’ll get a “thank you” for it one day – promise. 

Combine Dull and Dashing

The Core and Satellite approach to building a portfolio isn’t nearly as talked about as it should be. Core and Satellite is the investment equivalent of having a healthy, balanced diet but allowing yourself regular treat days.

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I think all of us, at one point or another, get carried away investing in the exciting stuff and forget just how important it is to have some plain vanilla bonds or a simple, low-cost global tracker fund doing the hard work at the heart of our portfolio.

Niche, thematic funds that tap into cybersecurity stocks or racy frontier markets can certainly add some life to a portfolio, but it’s a very brave person that bets their entire retirement pot on, say, a timber fund.

When we read about the stocks that double overnight and the Next Big Thing, it’s easy to forget that often taking the simplest approach is the best strategy for your portfolio. Picking a steady Eddy that you can trust to perform over the long-term might not sound exciting, but it’s unlikely to cause you any sleepless nights. And you can always dabble with the other stuff around the edges. 

 



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