Money Talks: How to move from saving to investing

Women are more reluctant to move from saving to investing, but the rewards can be worth it

Investing in funds should form a a major part in your financial wellbeing.

I am a 45-year-old professional woman, invested in cash funds for both my pension and savings. I have never invested in the markets due to the horror stories I have heard about people losing out on shares and a total lack of understanding or interest in how the markets work. Now that fees and negative interest rates are eating more and more into my funds, I want to learn more and make a move into the markets to hopefully maximise my return — can you advise?

Various surveys carried out at HerMoney consistently find women save more but men are likely to invest more. Women are more reluctant to make the move from just merely saving to sensible investing. Investing in a well-balanced, diversified portfolio — whether it is a pension or savings policy — is essential and should form a major part of your financial wellbeing.

Our research demonstrates that women are big fans of savings deposit accounts, preferring to keep their money safe and accessible rather than taking even the minimum of risk on the markets. Like yourself, a lack of trust in the market is one of the main barriers stopping women from progressing from merely saving to investing their cash. 

More than a third of women say they don’t invest because they think they don’t know enough about it. This increases to almost half of millennial women.

There has never been a five-year period in history where savers have not done better by investing, so your money will most definitely grow once you take that plunge. I know you are thinking that cash is better for you right now as it is low risk, but, as you know, because of inflation, fees, and negative interest rates, you are doing yourself a major injustice here.

The concept of risk tolerance is indeed one of the most difficult concepts for a nervous client to grasp. Of course, markets can be volatile, and with every investment comes a certain level of risk. Stocks are riskier than bonds or cash, but diversification is key. 

The potential return for your investment is directly related to its relative risk and riskier investments most definitely hold the potential for higher returns over the medium to long term.

To get started, my advice would be to engage with a professional financial adviser who will carefully take your personal financial objectives into account and match you to a suitable portfolio, having carefully determined your attitude to risk. 

You need to feel completely comfortable with their proposal and don’t be afraid to ask plenty of questions, no matter how silly you think they are. 

The main thing here is to get comfortable with the basic concept of investing and, after a while, when you begin to see your portfolio gain positive returns, you will become more confident and perhaps even discover a newfound interest in how the markets work and enjoy following and understanding its performance.

I would consider your pension first as this is likely to remain invested for at least another 15 to 20 years so, because of this much longer investment span, there is more potential for an exponential increase in the value of your fund by investing in even a low to medium risk fund. 

As your portfolio earns more return, these earnings are added back, helping it grow even more over time. This compounding concept is completely time-dependent so the sooner you act on this and invest, the more time your money will have to earn a good return. 

Maximising the value of the compounding function is key when it comes to investing.