This week’s profile in my ‘Investing : a woman’s perspective’ series is really great and I think you are going to enjoy it as much as I did. Our featured guest is a long time investor who has experience of the highs and lows of investing, having seen the dot.com crash in 2000 and ridden the ups and downs since.
I absolutely love that she wears the trousers when it comes to making financial decisions in her marriage; she makes all the investment decisions for herself and her husband. A poster girl for this series if there ever was one. Interestingly for me, she faces a similar challenge which I observe in my own household – a risk averse and worrier-by-nature husband! It’s great to see how they have been able to focus on their shared goals and create an investment portfolio which works for them both.
Thank you Tuppenny for your interview.
Firstly, tell us about yourself?
My husband and I have been married a long time and we have two daughters. We’ve owned our own home throughout our marriage and have been mortgage free for 10 years now. Apart from the time when we kinda accidentally bought another house whilst searching for the right place to retire to.
My husband hates debt of any kind so paying the mortgage off was always a priority. Every time I managed to save a little money on our bills I would overpay the mortgage. For instance, one year I changed our house insurance and saved £4 a month, that exact amount was then added to our overpayments.
I’ve been a civil servant for over 30 years and work full time. My husband has had a variety of jobs as he has changed career a few times chasing more interesting work. He is currently self employed.
I’ve always been a saver but those savings never amounted to much as we didn’t have much money for a long time. I started out my financial life as a teenage mum living in a bedsit and learnt the hard way that you need to manage your money in order to pay your way and not get into debt.
Neither of us have earned enough to pay 40% tax, we have reasonable incomes but we certainly can’t fill our ISA allowances each year. Saving money has always meant making decisions about what we won’t buy in order to save. We don’t go without but we have chosen to not do or buy certain things which frees up money to invest.
What investments do you have? What are your goals for your investments?
I take all the investment decisions and actions for the both of us. Our investment goal has always been to end up with enough money to live off until our pensions kick in. With a final salary pension you don’t need to live by the 4% rule so the aim has always been save enough to then start spending. Leaving enough for a large emergency fund.
Our investments include:
- Self Invested Personal Pension (SIPP) for my husband
- Small Personal Pension for myself
- S&S ISAs invested in Vanguard Lifestyle 60% and 80% and Blackrock fund
- Cash ISAs
- IFISA in Peer to Peer lending, each with a different platform to spread the risk
- P2P taxable lending accounts on another 2 platforms
I keep things simple across all our investments. The SIPP is invested in Vanguard Lifestrategy 60% and has 2 years of our planned living expenses sat in cash. I know the cash is losing value due to inflation but it has had a 20% uplift via the government and my husband will start drawing down his pension in 2 years time. The stock market is volatile so having 2 years in cash means we don’t need to sell investments if there is a downturn just as he hits 55.
Our S&S ISAs are with the Halifax as they only cost £12.50 per year in fees. Again invested in Vanguard Lifestrategy 60% and 80%. (I was feeling strong when I invested in the 80%!)
We have more than we should in Cash ISAs but my husband is extremely risk averse and I am a worrier. Indeed he has said on more than one occasion that if I popped my clogs he would centralise all our money into one bank account so he can see it in one place! Yikes! That’s why I do the finances.
How long have you been investing for? What made you start when you did?
In 2000, my husband left his job and final salary pension and became self employed. That triggered me looking into pensions and investments and I ended up setting up a Stakeholder Pension for him.
I prefer to be fully informed before making any decisions which can mean I a) spend too long doing research and b) not make the decision. However I knew that he needed a pension and we were going to be funding it from our monthly income. If I didn’t decide and organise one the money would get spent. That helped me overcome my fear. Although it still took me a year!
I have always worried that I don’t know enough to be a ‘proper investor’. I think you nailed it when you said that women are reluctant investors. I am reluctant because I don’t think I know enough (still don’t).
We made early retirement our goal 10+ years ago and I knew we wouldn’t get there by putting our savings into just Cash ISAs. We had to invest in both pensions and the stock market in order to increase our chances of having enough money to retire early.
We will drawdown on my husband’s pension when he is 55 which will provide us with some money to live on. We will top this up with money from our Cash ISAs until I take my final salary pension.
How did you decide what to invest in/research your investment(s)?
My starting point was a Stakeholder Pension as I read these had charges capped at 1%. However a pension is just a wrapper and it’s the investments you put inside that wrapper that make or lose money. I read mainstream newspaper finance articles about pensions and knew enough to change the investment away from the default option but not much more.
I planned to invest in our first S&S ISAs in 1999 and had identified two top performing fund managers to invest with. Again my research was mainly down to the newspapers. I procrastinated because, quite frankly, I didn’t and still don’t understand funds, exchange traded funds (ETFs)s, open ended investment companies (OEICs), company reports, P/E ratios etc. I would love to understand but I just can’t understand enough information for me to feel comfortable with using those as my decision basis.
So I delayed investing until mid 2000 by which time the tech crash had happened. I invested our money in those 2 funds and then left them for 15 years! By then they were noted for being ‘dog’ funds. After 15 years they were worth exactly what I initially invested! Lesson learnt – always check your fund performance and move the money if it’s not doing well.
I should have moved those funds earlier. I knew about index trackers by then but wasn’t confident in making the switch – I annoy myself sometimes with my procrastination. I finally switched those funds to an index tracker and within 6 months they had increased in value and have continued to do so ever since.
I read loads and learnt a huge amount but to this day I still feel like I don’t know or understand enough to confidently invest the way the big boys do. I researched index trackers and found websites like Monevator who do a good job in explaining why most people should only invest via trackers and that there are no fund managers that consistently beat the market. This resonated with me but then what to track?
Vanguard was identified as best due to no shareholders, lower fees etc but still, which Vanguard tracker to track? Along came, very timely, their LifeStrategy Fund range. Finally something I could understand better and seems more suited to me. The funds incorporate a bunch of trackers in one place and you invest via the % according to your appetite to risk. 60% equities to bonds suits us, job done.
Has your attitude to investing always been the same or changed through your life?
I didn’t think about investments in my 20s but have always had an interest in financial matters. I always read the financial pages of my in-laws daily newspaper and the Financial Times when visiting my parents. Even though I didn’t have any money at the time to invest!
Looking back, I think the trigger to start investing, or at least researching some was my husband leaving his final salary job after 16 years to become self employed. I somehow knew we needed to start a pension for him although it took me a year to do so. In comparison many of his long term self employed colleagues still don’t have a pension!
Being focused on our goal of early retirement I knew I couldn’t leave our money in low paying savings accounts. Inflation eats away at your money so you must make it earn its keep. I had to make our money work as hard as possible. I am still not 100% comfortable with investing but I have got used to the risk element. After all, every time you get in the car you are at risk of a car crash, it’s the same with your money.
The Peer to Peer (P2P) lending accounts are my foray into higher risk markets. I dipped into these to aim to get a small regular income as we near retirement. I certainly wouldn’t have considered P2P even 3 years ago as your money is not protected by the FSCS. I am currently getting 8-12% return on investments here. However P2P is not for the faint-hearted and you will incur losses. I do not recommend anyone getting into P2P who is not used to the ups and downs of at least the stock market.
If you have children, do you invest for them and if so, in what?
We never invested for the girls when they were younger as we never had any spare money. When my eldest daughter reached 16 we stopped her pocket money and insisted she found a part time job to see her through college. We paid for her bus pass and college essentials but she was responsible for buying her own clothes, entertainment etc.
We saved her child benefit money for those 2 years and gave it to her when she went to university. This money helped her buy a laptop and see her through the first term. We did the same for our youngest daughter but are funding her more than we I feel we should.
The eldest was 20 before we started to feel like we had money to spare, by which time we were focused on early retirement. We haven’t invested any further monies for them (they are no longer children) but we do act as the bank of Mum and Dad! We have lent her money on an interest free basis, e.g. we helped with her deposit for her 1st house. We always insist on regular repayments but wipe the balance once she has paid at least half back.
What advice would you give to someone who says ‘I don’t know where to start’….
Firstly, everyone needs a pension! If you are eligible for your employers workplace pension, make sure you are opted in!
Your employer has to pay in on your behalf in addition to your contributions, that’s free money from your employer. The government will also chip in 20% as long as you earn enough to pay income tax.
To get started in investing I suggest reading the Monevator site. There is an excellent post on the best brokers/platform to use for pension, ISAs and SIPPs depending on the size of your money pot. Even better there is now a comparison tool which helps you identify which broker/platform is best for you.
The main thing to remember when you are investing, you are doing so for the long term. You shouldn’t invest in the stock market unless you plan on leaving it there for at least 5 years, 10 years would be better.
A few reminders:
- A stocks & shares ISA is a tax wrapper which means all gains and dividends are yours to keep tax free
- There has been a ton of research over the years which all conclude that no fund manager has beaten the stock market over the long term
- Tracker funds are low cost so more of your money gets invested, fees are usually around 0.5% – 0.75% including the platform fee
- You don’t need an Adviser to invest your funds – you’ll pay up to 3% in fees
- Time in the market is more important than timing the market – i.e. get your money invested as soon as you have it
- Don’t wait thinking the stock market is overpriced – you are investing for the very long term (10 years+)
- Pay yourself first, invest monthly as soon as you get paid
Getting started may seem daunting but you can change what you are investing in at any time.
Previous profiles in the ‘Investing : a woman’s perspective’ series have featured award winning journalist and money blogger Faith Archer and social entrepreneur Jennifer Kempson. Do check them out if you haven’t already.