Behind every investment is a person, a person with goals that they’re trying to achieve. This year Moneyfarm takes to the streets to speak to the people behind the investment and share their stories.
Mark Baldry, father of three, was fortunate enough to live through one of the greatest bull markets of all time. This has given him an optimistic view of investing that he hopes to share with his children. We talked to him about his concerns for the future generation of investors and the things he wished he’d known earlier in his investment journey.
Beyond investment risk
“Markets aren’t magic, it’s not like playing roulette” this is one of the things that Mark has been trying to explain to his family recently. His children are now 28, 30 and 32, they’ve all reached the age where Mark feels they can start to put away money for the future. The difference between Mark and his children is what they’ve seen in the financial markets; for Mark the bull market has outlived the bear market, but much of his children’s working lives has been spent in the aftermath of the 2008 financial market crash.
Mark’s challenge is, in many ways, similar to Moneyfarm’s: to explain the benefits of investing to an audience that can only see the downside risk. According to Mark, “cash won’t get you anywhere, it depreciates over time, especially today”, so his children, and their generation, need to get moving, understand the risks involved, and look at alternatives to cash savings.
But the investment market is confusing, they don’t have the time to think through their investment decisions, and that means they freeze. Your 20s and 30s are spent trying to forge a career and build a family, so is there time to execute a well-researched investment strategy? What his children need is reassurance, they need to understand what asset allocation is, how pound-cost averaging works, and the time value of investing.
Focus on cost
When Mark started investing there weren’t the choices that there are today and he wishes he’d understood cost and the impact it could have on his savings. Mark was charged for commission, trading, funds, not to mention all the hidden costs, it always left him confused.
“I’d read that markets were up by 10%, then check my holdings and see it was only up by 2%.” Win, lose, or draw, those fees came out of his account, it was heads the fund manager won, tails Mark lost.
Ultimately, it was the power of compounding in Mark’s investments that suffered, as the fees came out of his account, less was left invested, which meant that less was earning returns.
Take the help you can
Mark’s number one piece of advice to his children is simple, do a budget and figure out what you can save and make sure you have enough cash. What they need is a company that can help make the magic of compounding work, this is a complicated exponential calculation that you can’t do in your head. But this is the critical power of investing.
With changes to the state pension, and the shift to defined contribution pension schemes, individuals can’t rely on the government or their employers anymore. If you want money for the future, you have to save it yourself, and take whatever help you can, this could even be from the financial markets.
Mark was very positive about the new breed of wealth managers that Moneyfarm falls into. “The reality is that when you start your investment journey not many people will want to help you. The amount of savings you have will undoubtably be too small for most investment advisers to consider. As such you need a route to market and a mechanism that won’t cost you a small fortune or require prior investment knowledge.” This is where the robo advisers come in.
But it’s not about telling his children what to do, it’s up to them, “you can share stories, and offer guidance, but they’re not you, they have a different view of what they want out of life and how to get there, I’m here to equip them with the tools they need to make informed decisions.”