A Savings and Investment Special!

In this savings and investment special, Martin speaks with two professional investment advisers. Plus, his beginner’s guide to savings and how to maximise your interest.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:06Speaker 01

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• 1:47Speaker 02

  BBC Sounds, music, radio, podcasts.

• 1:50Martin Lewis?

  Hello, I'm Martin Lewis and this is the cunningly named The Martin Lewis Podcast. I do wonder what that's going to be about. Now, usually, much of it comes from my BBC Radio 5 live show with Adrian Charles, and this one is extra special. Oh, yes, indeedy, because I'm on a break, so it's a good excuse for a best. Bits Pod. The producers have put together what they think are some of the most pertinent and still relevant elements of the podcast we've done so far this year. Let's just hope they're right. Though worth noting, if I do mention specific products, do be aware they could have changed, so double check before you take any action. We don't want you listening to February's Best Buys once you're in August.

• 2:31Martin Lewis?

  This episode is a savings and investment bonanza. I did a beginner's guide to both, so we've morphed them together. Who should be investing where and how to maximise your interest from savings. Oh, I'm so excited, just play the theme tune.

• 3:02Martin Lewis?

  These are my five questions people should ask themselves about their savings to help them decide what to do.

• 3:07Speaker 04

  Okay, so here's the first one. Now, do I want to maximise every penny or decent easy solutions? Is it about getting every penny or is it just about something easy?

• 3:22Martin Lewis?

  So this is about effort versus reward. Look, what most people want, I will be honest, is they want one or two savings accounts that pay them a good rate that they don't have to hassle or worry about. You want to be getting at the moment at least four and a half percent interest. You put your money away in it, you forget it until you need it and it needs a little bit of managing. That's one solution and we'll be talking about that. Then there are some people, and they tend to be people who listen to what I talk about, who want to maximise every penny. So you know every single penny of the money you're putting away in savings is earning the most possible interest. That will usually be, you know, think of a champagne fountain, Adrian. You know, you've got the glasses on the bottom and then the glasses above and it goes up to the pinnacle of just one glass on the top. You know what I'm talking about? And then they pour the champagne in

• 4:07Martin Lewis?

  the top and it fills the first cup and then once you've filled that one, it spills over to the next level. And if you're lucky enough to fill, well, that's what we're trying to do with savings in the perfect solution. You maximise every bit of savings in the one Pays the most, it'll be something like a regular savings account where you drip feed up to 300 quid a month at 7% interest. Once you've filled that, you look at the next tier and then once you've filled that, you go down in tier. So every penny you've got is earning the maximum. Takes work, takes effort, takes monitoring, takes savvy. Decide at the start which you are. Are you an easy life and I want it to be pretty good? Or are you, I want to maximize it, maybe get a twentieth or a tenth more on top because every single penny is perfect and I've got it all in my spreadsheet. You've got to decide that at the start.

• 4:52Speaker 04

  As you put your arms above your head then, I got quite distracted by the muscle definition in your arms.

• 4:58Martin Lewis?

  Thank you very much.

• 4:58Speaker 04

  Nice biceps.

• 4:59Martin Lewis?

  Thank you.

• 4:59Speaker 04

  Good guns.

• 5:01Martin Lewis?

  Suns out, guns out.

• 5:02Speaker 04

  Okay, second question. Can I lock money away for years or do I need access?

• 5:08Martin Lewis?

  So this is a really important question. You're defining what you want with your savings. Are your savings something that you need to be able to use and spend? Or are they something where you can put them away for a defined time that you will absolutely not be able to touch them in that time? If you're going to be putting them away for a defined time, then you can take a fixed savings account. Now in a fixed savings account, the interest rates tend, although they're not always, to be higher and they're guaranteed. In easy access or no notice, which is where you can take your money out whenever you want, the interest rates are variable, so they can move, so you need to monitor them, they can go down, they can go up and you need to be on top of them. With a fixed account, you put money away for two years, you know exactly what the interest rate will be. It's locked in, it's guaranteed,

• 5:53Martin Lewis?

  but you can't access it with the one exception of fixed rate cash ISAs. They're not allowed to lock your money away, but if you take your money out of those, you will lose some interest. So it's really worth having that thought. We're going to go through all the best products later, but is the thought, how much of my money do I need access to? How much can I lock away? I mean, clearly you might have 30 grand, you might say I want 10 grand of access to it and you should always have a rainy day fund of a few months of bills and I want 20 grand where I'm going to be locking, I can lock it away and then I can get the guaranteed rate.

• 6:23Speaker 04

  So I asked myself now, am I putting new money aside regularly?

• 6:28Martin Lewis?

  Or is it all a lump sum? I'm really feeling the depth of the question. So this is a very simple one. I mean, if you're putting money aside regularly, there are special accounts called regular savings accounts that only allow you to put a relatively small amount of money in, up to two to three hundred pounds a month. But the interest rates are much higher. So that is a useful way to save. They tend to only last a year or so. There's a whole list of them.

• 6:52Martin Lewis?

  Alternatively, if you've got a lump sum, while you can drip feed it into a regular savings account to get the higher interest, if you're doing that, let's play it to the maximum. For most people, you'll just want to put it all in one place. Just a tiny little note, because lots of people get in touch with me about these regular savings accounts and say, it's a con, it's a con. I don't know why they use that voice, but they do. I don't know how they do it in writing, but they do. It's a con, it's a con. And this is the reason why they say that. Let's say it's paying seven percent interest and you're putting three hundred pounds ish in a month. At the end of the year, you've got three grand in the account and they go, I've got three grand in the account, it's seven percent interest, I should be getting two hundred and ten pounds interest. And they look in their account and they've got a total of a hundred and ten pounds interest and they go, it's a con, it's a con.

• 7:37Martin Lewis?

  What's actually happening is you only get paid interest on the amount that you have in the account. Now, if you think about it, you're putting in roughly three hundred pounds a month. Well, you only have three thousand pounds in for the very last day. The month before you had two thousand seven hundred in, you know, six months you had fourteen, fifteen hundred quid in. So actually, the way to think about it is, I'm going to get roughly half the interest I think I would, because while I've got three thousand pounds in at the end of the year, because these accounts normally last a year, my average balance over the year is about half that, fifteen hundred quid. So I'm going to get roughly seven percent of fifteen hundred quid. But the crucial point about them is on the money that is in there, you're still getting

• 8:21Martin Lewis?

  the best interest possible compared to anywhere else. So if you were moving it from a lump sum account, so let's say you had your money in five percent easy access savings and you were dripping that across into one of these regular savers, you're still earning money on the five percent easy access savings while it is moving into the regular saver. So don't not use a regular saver because of that maths. It's, you're still getting the most interest on whatever money you had in that account. Stop right there. I'm interrupting the pod because I just want to talk in a little bit more detail about cash ISAs while I've got a moment to do so. I've been doing this particular analogy since 2001 and it's not stale yet. I think it always works, so I'm going to do it for you now.

• 9:04Martin Lewis?

  I want you to picture a cake. We're going to think of it like a chocolate cake. That's going to represent cash savings, money in savings. Though equally, it could be a strawberry cake to represent shares. Now, normally, when you've got money in savings account, the tax officer can come along and take a bite of the interest.

• 9:26Martin Lewis?

  Tasty. But, all an ISA is, it's not a product. It stands for Individual Savings Account. It is a wrapper, like a protective piece of cling film, that you can wrap around your cake. The cake is still exactly the same chocolate cake. It's still the same savings account. If it's easy access, it's still easy access. You can take your money out when you want. If it's fixed, it's still fixed. The money is locked away with a guaranteed rate of interest. It's still just a savings account. The only difference is it now has this wrapper around it. And that means, when the tax officer comes along, oh, they can't bite it anymore. Because it's got the protective cling film around it. So when we talk about cash ISAs,

• 10:10Martin Lewis?

  people tend to think it's something different. Yeah, my money's locked away, I can't change provider. No. A cash ISA is just a normal savings account, where the interest is not taxed. You get £20,000 a year maximum that you can put in a cash ISA. Once it's in the cash ISA, it stays tax-free year after year, until you take your money out. There's no tax when you take the money out. It's just, then it's no longer in the ISA. You don't get the tax protection anymore. So if you were to have savings that were taxable and you put it in there, it'd be taxed. But as long as it's in the ISA, it's tax-free year after year. So you could put 20 grand in this year. As long as they don't change the allowance, it's 20 grand next tax year, 20 grand the year after that. And people could have a lot of money inside cash ISAs, inside that cling film. Also, crucially...

• 10:54Martin Lewis?

  Don't think when you've got your money in a cash ISA, that's it, you can't move it. You have a right to transfer your cash ISA. So that means if your cash ISA rate drops, and they will do certainly if they're easy access or when you fix ends, you can simply go to a new cash ISA provider. You open it up and within the form, you don't have to put any new money in. You fill in the transfer details. Most cash ISAs will allow you to transfer. It will then take the money from your existing cash ISA and put your money in that cash ISA or within the cling film. You're never taking it out, you're not losing your tax-free status. And crucially, transferring does not count towards your allowance. So I said you're allowed to put £20,000 a year in a cash ISA.

• 11:39Martin Lewis?

  Well, if you've got an older cash ISA that you're transferring to a new provider, that doesn't change that 20 grand a year. The 20 grand a year is for new money. So hopefully now you understand that cash ISAs are a piece of cake.

• 11:54Martin Lewis?

  I want to talk to you about the Help to Save scheme. It is by far the best paying form of savings you will ever get. And if you have access to it, it is the first place you should be putting your money. But interestingly, I haven't had any questions on it, which worries me that not enough people know about it. So I'm going to talk to you about it in brief here. The first crucial part about Help to Save you need to understand is it is only available if you are on universal credit and you work and you earn at least a pound. They've actually dropped the threshold recently of how much you need to be earning in order to get Help to Save. So it's now just a pound. And what it does is it gives you a 50% boost on what you save, even if you have withdrawn the money.

• 12:38Martin Lewis?

  So anyone on universal credit, you should be opening this up, even if you don't have the money to put in it right now, because even if you were to get extra work, that meant you were no longer eligible for universal credit, you would still be able to keep this account open once you've opened it. So here's how it works. You can save up to £50 a month in it. And after two years, you get a 50% bonus on the maximum that you had in it. Let me try and explain that. So let's imagine you're maxing it out, you're putting 50 quid in a month. You've got 50 quid in, 100 quid, 150, 200, 250, 300, 350, 400, 450, 500, 550, 600. You've got 600 quid in. No, you've just had an emergency. Your window's been smashed, it's terrible, you're going to need to pay for it. It's going to cost you the whole 600 quid.

• 13:22Martin Lewis?

  So you do that, you take your money out of savings instead of having to borrow for it. And you therefore pay for your new window. Ignore, it might be more than one window. We'll call it cost 600 quid, you get the point I'm trying to make. Now you've got nothing in the account and unfortunately you can't afford to put any more money in the account for the remaining two years. At the end of the two years, you get a 50% bonus on the maximum you had in the account. Well, the maximum you had in was 600 pounds. So even though you have nothing in the account now, you still get a 300 pound bonus, even though you took the money out. And then for another two years after that, you get another 50% bonus calculated on the maximum balance you had in over the second two-year period compared to the first two-year period.

• 14:07Martin Lewis?

  Works in a very, very similar way. It's absolutely off the charts for people who use it. If you're on universal credit and you work, you should be opening a help to save account. It is by far the best form of savings possible.

• 14:24Martin Lewis?

  So that's the best bit of savings. Now let's do the best bit of investments. Take it away, Martin. Okay, so I'd like to welcome first of all Valerie Wilson, who is a chartered financial planner at Johnson Carmichael Wealth. Valerie, hello.

• 14:38Speaker 05

  Hello.

• 14:39Martin Lewis?

  Thank you for joining us. And Louise Claro, Managing Director of Circle Financial Services and an independent financial advisor. Okay Louise, what do you do for your profession? For people who are at the very basics and don't know what an independent financial advisor is?

• 14:54Speaker 05

  My role is to understand what somebody wants to do from a financial point of view and set a pathway up for them. That may or may not involve regulated products. So banks, cash building societies, national insurance, that's all nice and easy. But you might start straying into things like financial advice. And I deal with that. So I set people on pathways and I'm what's called whole of market. So I can look at the entire universe within certain parameters that the regulator allows me.

• 15:23Martin Lewis?

  So what you can do, that we should say the difference between advice and guidance, you give advice is if somebody comes to you and you follow all the regulations, do a full fact find and get all the information off them. Then you can tell them specifically what to invest in when we're talking about investments. You know, you could say this fund is a good one for you and mix with these two, couldn't you?

• 15:43Speaker 05

  Absolutely. And I think critically, it means then that if it goes wrong in the future and my advice and you took it turned out to be wrong. You have got recourse back to me.

• 15:55Martin Lewis?

  Although it's worth stating, we're talking about investment here. So clearly you cannot know what is going to happen in an investment in future. What you're talking about is making sure that the risk is appropriate as for money. You know, there is still a chance that an investment can drop after you've recommended it. And you wouldn't be on the hook for that, would you?

• 16:13Speaker 05

  No, as you said, performance is not necessarily something that you can go and make a claim over. But if I put you into a funds that was clearly way high to risk. And you told me in actual fact, you were a more cautious investor, then you could potentially have recourse back to me.

• 16:30Martin Lewis?

  Yeah.

• 16:30Speaker 05

  And get your losses back.

• 16:32Martin Lewis?

  So for example, someone comes in and says, I want to be cautious. I want to take a little bit of risk, but not too much because I'm getting, you know, I'm moving through my, I'm getting a little bit older. I don't know quite where, where I want to go and I need to keep my money safe. And you said, let's put all your money in a single tech stock, which is about as high risk as you're going to get. A single share. I mean, clearly that would be inappropriate. But if you said, we're going to put in a basket of global assets, which seems to be appropriate for you. And this should do well. And it dropped in performance, you couldn't come back. Let's go to Valerie now. Now you're a chartered financial planner. Can you explain the difference between that and an independent financial advisor for us?

• 17:05Speaker 06

  Yeah, so where we start with, when I see a new client is we understand where they are today and their objectives over kind of short, medium and long term. And we really build a plan for the future and make a plan as to how to meet all those objectives over time. Once we then got that plan, that's when we move on to the investment side of things, where we would recommend certain products and certain investments to meet those objectives over time. And similarly, we would have discussions around investment risk and sustainable preferences to work out what type of investments they should be investing in.

• 17:43Martin Lewis?

  Okay, so that's what they do. It's worth me saying as well, look, I mean, getting independent financial advice or chartered financial planner, they're professional services and you pay for them. They tend to be targeted at people higher up the income level or higher up the wealth spectrum. You do not need to go and get that help always. Those who have substantial funds, absolutely, it is worth paying to go and get yourself advice, looking at the risk, looking at the tax implications, looking at your planning. But for many people, it won't be fundable. You can invest by yourself, though. There are platforms out there that will help you to do so. And you can be looking at this. So this isn't only for wealthy individuals investing. Let's start with a question. And we've had many, many questions coming in. Stephen says, I'm saving to retire in a few years. It's just

• 18:28Martin Lewis?

  sitting in the bank earning very little. I would never invest as I don't know enough about it and do not want to lose even a penny. So let me start on that. Stephen, first thing is sitting in a bank account is a terrible thing to do. As the very basic minimum, you should have your money in a top savings account or top cash ISA. There's no risk to putting it in savings. Probably a good point to define the difference between savings and investing, actually. Saving is where you put your money in a financial institution. It has deposit protection, which means the amount you put in will never drop and you get a defined amount of interest. Now, the interest may be variable, so it may change over time, but you know what you're going to earn. So 4% interest on a thousand pounds would mean

• 19:12Martin Lewis?

  at the end of the year, you have 1,040 pounds in it. Your money, up to 85,000 pounds per person, per financial institution, is protected by the financial services compensation scheme. So in the unlikely event a savings institution went bust, you would at least get that money back. What would tend to happen is your savings, they tend to move it to a different institution. Or investing, where you're putting your money into shares or bonds in the hope That the amount that you have grows, it might grow because of dividends, it might grow because of capital growth, so that you in future are able to sell it for more, hopefully substantially more than you bought it for, but there's no guarantee that you will be able to. That's the rough difference between the two.

• 19:54Martin Lewis?

  So Louise, someone who says, I would never invest as I don't know enough about it and do not want to lose even a penny, what do you say to them?

• 20:02Speaker 05

  Educate yourself. Now, if this person cannot afford to get financial advice, start looking at some quality FCA-regulated platforms that will give you some really good help and advice. One of the places you could go to is Money Helper, which is a government-sponsored website, and that just runs through exactly what risk is, the different types of categories of risk. What I would say is, it is actually risky having all your money held in cash for the simple reason, ignore institutional sort of invest going bust or anything like that, let's assume they don't and they probably won't, but each year that your money's in cash and not earning enough to keep pace with inflation, if this is for retirement, then the real value of it in 10, 15 years' time is actually going to go down.

• 20:47Speaker 05

  So on paper, it might be the same pound, but the buying power is substantially less. So that is risk in itself. So.

• 20:54Martin Lewis?

  I would just say that at the moment, the top savings do outpay inflation, but we had a long period where the top savings were actually losing because your money was eroding in inflation return.

• 21:03Speaker 05

  Yeah. Over time, money will lose its buying power, and that's simply down to this horrible thing called inflation. So if you are going to invest or you're looking at drawing down over time, it is worthwhile having some money in something other than just cash, which at the moment is being outperformed by equities.

• 21:21Martin Lewis?

  Well, it's interesting because I phrase this as to save or invest. The answer isn't to save or invest. It's likely for most people to save and invest. Right? What you want, whenever you've got assets, if you're lucky enough to have them, is you want a spread of assets. Some of them you want in ready liquid cash, which you want to have available, which you should be saving. Some of you want in investments to grow. The amount of risk you take depends on age and your financial circumstances. But Valerie, I suppose that the real concept, we're trying to just do the basics at the beginning, the real concept here is. People think that they're going to put money in an investment and, you know, it's going to be incredibly volatile and it's going to move up and down. Well, the vast majority of standard investors are not putting money in an individual share. They're putting money

• 22:04Martin Lewis?

  in a fund, aren't they? And that's a collective investment which has loads of different products inside it. Could be, you know, you could be doing a globally spread of assets where you're invested in thousands of companies. So one company doing badly won't have that big an effect and you're looking at the net effect of all of them together, which over the long run should outperform saving.

• 22:24Speaker 06

  Yes, that's right. And I think it's important to define investment risk because what we mean by it is, as you say, the volatility. So how much it will go up and down. But if you look at historical performance of investments over longer periods of time, investments have always outperformed cash. It's just in short terms, the value is going to go up and down. So one way to help reduce the volatility is to hold a very diverse portfolio. So what I mean by diversification is you need to hold it across different types of assets. So for example, stocks and shares, bonds, commercial property, commodities.

• 23:06Martin Lewis?

  Okay, right. Stocks and shares are effectively when you're investing in the value of a company. And so you own a portion of that company and you might get growth in the value of the company. In other words, someone will buy it off you for more than you bought it for. Or you might get dividends where if the company's making profits, it likes to distribute some of that to shareholders. What was your next one? Bonds?

• 23:27Speaker 06

  Yeah, so bonds, you get government or corporate bonds. And essentially, a bond is when you loan money to either the government or to a company. In return for the loan, they will pay you an interest over time. And at the end of the term, you will get a maturity value back.

• 23:45Martin Lewis?

  Commercial property is pretty obvious. So, but most people can't afford commercial property. Would you be investing in a portion of a commercial property? Is that what you're talking about?

• 23:52Speaker 06

  Yes, that's what I mean. You can get exposure to commercial property through holding funds.

• 23:59Martin Lewis?

  Right, so those are funds that are investing in a spread of commercial properties for you, so that, you know, many people always talk about, I don't want stocks or shares, I prefer property. You can actually invest in property and you can invest in commercial property through a fund that is available, you know, to buy through the market. You don't actually have to go and buy the property yourself.

• 24:17Speaker 06

  Yes, that's correct, yeah.

• 24:18Martin Lewis?

  And the last one, commodities?

• 24:20Speaker 06

  So that's things like gold, oil and gas.

• 24:24Martin Lewis?

  Chocolate, sugar, port barrels, all of those things, commodities, stuff that you're sitting on and you're effectively, you know, you might have bought chocolate, the price of cocoa has gone up very rapidly over the last four years. If you bought it and held a, you know, a nominal, a virtual stock, which is what investing is of cocoa, you might have made money from it. So that's investing and it is about that spread, isn't it? And so what, Stephen, the real thing is, you're saying you don't want to lose any of your money. Well, there's always a chance, but you also want it to grow more quickly. And so what you have to do is look at how much of your assets you're willing to take some risk on. But the wider the spread of assets you have, the less you're likely to see really huge growth, the less you're likely to see really huge falls. That's right, isn't it, Louise?

• 25:09Speaker 05

  It is. And what I would just say here, Stephen, let's just pretend you're 58 and you're looking at retiring at the age of 60. That 60th birthday does not mean that on your 60th birthday, you're suddenly going to need however much is in your pension fund all at once. The reality is that pension fund that you've accumulated, let's just pretend it's a hundred thousand pounds, that's going to be drip fed to you over the next 20, 30 years. So there has, do not worry about investing for the future, even though you think, oh my God, I'm retired, I have to keep it all safe. No, you don't, because you only need to keep safe what you realistically think you're going to be drawing down over the next three or five years.

• 25:50Martin Lewis?

  Can you explain that term for us?

• 25:51Speaker 05

  Drawing down is where you take a monthly amount out of the pot of cash that you've got set aside for your retirement. Let's just say it's in a pension fund. It could be anywhere, but it's the amount that you are taking down each month. But the remaining capital, if that's not going to be used over the next two or three years, you need to think, okay.

• 26:11Speaker 05

  Can I reasonably look at putting some of that into something that's going to potentially get me a better rate of return? Because I'm still going to be here, hopefully, when I get to 70. So I have got a 10-year horizon.

• 26:22Martin Lewis?

  So we're interesting, we're talking about time there and Valerie mentioned it earlier. As long as you're putting it in a reasonable length of time. So what would you say for, you know, someone with standard finances is the minimum amount of time you should be looking to put money away before you invest it? Is it one year, two year, five year, 10 year, 15 years? Valerie?

• 26:42Speaker 06

  Yeah, so I would say you would want to do it for a minimum of five years. That is because that either gives the investments time to recover after a fall or it gives them time to grow and fall. So that's kind of the time scale in which you would expect to get back at least and hopefully the growth on what you put in.

• 27:02Martin Lewis?

  Okay, so I'm going to run through some of the other to save or invest questions, which is the first section I've got here. And we'll go quickly. Let's ask Louise, two questions together here. Fiona, what ratio of money should you have in savings and investing? E.g. 70% in savings, 30% investment? And Steve, similar. My initial question was about the ratio of cash savings to investment. What's a good balance? In asking that question, I also need to include age as a factor, as well as income to savings ratio and level of risk. So let's have a little bit of very rough generic guidance here, Louise, on what proportion of your asset allocation you'd have in savings and what you'd have in investment in general.

• 27:39Speaker 05

  Right, so depends on age, depends on goal and it depends what you're wanting to do and also what your current income levels are. So let's get a scenario going here. Let's pretend that you're 30 years of age. Let's pretend that you've just got your-

• 27:54Martin Lewis?

  I can pretend that, I can pretend that.

• 27:55Speaker 05

  Right, yes, right. So we've got Martin looking nice and healthy at the age of 30. You've just bought your first house, you're on the housing ladder, you're now paying bills out. In other words, what's coming in is pretty much what's going out. You're nicely sort of shackled up because you've got a house and you're running things. You probably are not going to have a lot of money left because you've just spent all your capital buying a house and putting a deposit down. But so therefore you want to slowly start to build up your assets again. Therefore, you're probably only really looking at being able to use the disposable income to put it into a savings account. By savings, I mean you want to start building back up, putting it into cash-based accounts, because what you don't want to do is deprive yourself of being able to come and get that cash out. If, for example, your new house

• 28:39Speaker 05

  has got a broken gate, or the boiler burst, or anything like that. So you need to start back going to cash. Once you are lucky enough, if you get a bonus, and in your 35 and you get a windfall, let's just say you get £10,000 from somebody, you can then perhaps look at putting that £10,000 into something that is investing, i.e. longer term. And you can do that because you've built up some savings in the meantime as your buffer.

• 29:04Martin Lewis?

  So your investment is for your non-crucial money, the money that you're not going to need to touch in the next five years or so, so you can put it away in that time. As you get older, as you move through that income scale, clearly, you know, you might have a little bit more. Let's talk about, let's move to somebody now who's aged 50, they're mostly paid off their mortgage, they've got decent income coming in, and they've built up a reasonable pile of savings, let's say 80, 90, 100,000 pounds. What proportion of that would you want to be looking at in investments? Everybody understands this is very generic, it's always specific to the individual.

• 29:37Speaker 05

  Well, back over to me again, then I would say if you've got everything, you've got all of your various sort of liabilities out of the way, everything's under control. If you've got an investment, if you're 50, you've got an investment horizon of, let's just say 10 years or so, there's no reason why you can't be putting 75% of that into investments on the basis that you've got income coming in, it still gives you 20, 30,000 pounds that is kept aside for a rainy day to meet bills, unexpected items, what I call yellow beak money, which is your children that have flown the nest that you think have gone, then come back saying, mum, dad, can I have this, can I have that? Their bills are always more expensive as they get older. It's strange that, isn't it? So I would say,

• 30:20Speaker 05

  as the older you get, the more financially stable and dependent you get, the more you can look at putting investing aside.

• 30:25Martin Lewis?

  And then, though, as you get even older, and you start to move past retirement and into older age. Then what you need to do is diminish your risk because you don't have that long for it to grow. So there is a curve here, isn't it? You start off younger, you probably want to be more in cash unless you've got a very large amount of money and investing less because you can't afford the risk. As you go up and you get more wealthy and more affluent, if you're lucky enough for that to happen to you, you want to take more investment risk. But then as you move towards the end and the final years of your life, you bring the risk down.

• 30:58Speaker 05

  That's exactly it. There's a posh word we use in the industry and it's called lifestyle, which means that as you're accumulating and you're building up, then you're building up. But then as time goes by, like you said, you get that curve and then you start to want to become more cautious. You don't want to start to take risks. You start to move away from higher equities or higher investing and your ratio towards savings, i.e. cash base, starts to increase. So it reverses back again.

• 31:24Martin Lewis?

  So Jane says, I hope you make it clear that the value of investments in assets such as shares can go down as well as up. Folks need to understand the risk versus reward and make sure they're not coerced into investing by some financial advisor. They need to choose wisely. Ian says, lots of people talk about risks as the barrier to entry for stocks and shares. However, what are the real risks in a global index fund diversified over 3,000 plus companies that you hold over five years? Are the compounding returns not worth it? Well, yeah, that, I mean, that's the basic premise. You know, if the worldwide economy is growing and you're invested in it, it should outperform savings because that's the way that the world works, although there are no guarantees. And I do think what's

• 32:08Martin Lewis?

  interesting here is one of the things the Chancellor said is that for so long, we've put all these risk warnings, and there are a hell of a lot of risk warnings on any investment. Past performance does not predict future performance. Investments can go down as well as up, that we have, you know, all the nudge factors and the barriers are actually trying to put people off investing. They're not meant to be doing that. They just want people to know the risks in advance. And I'm not sure, you know, risk is a fascinating term. Risk is a term that just means variance of outcomes. It means positive or negative. So risk, when you take high risk, the hope is you're going to get high growth. The cost is there's a potential that you're going to lose some of the money that you put in.

• 32:50Martin Lewis?

  And just understanding that risk shouldn't always be seen as a negative. Risk is something, sometimes an opportunity. Is something I think we don't necessarily use the language when we're talking about investing. I think that's where the Chancellor's going. And as long as we still remind people, you know, don't put your money in that thing if you cannot afford to lose a penny. Then I think we can start to change the language and the dynamic of the way that we talk about it in the UK. In the US, the culture of investing is so different. Louise.

• 33:17Speaker 05

  What we have to remember here is that since 2008, the big financial crash. Everyone was queuing up outside, getting all their cash out and then the financial services industry was their big, big bad boy, as were the banks. This is where the regulation became even more and more onerous, to the point that in the industry. We almost call compliance and regulatory intervention the business prevention unit. You're absolutely right. You can send a report to a client and all they want to do is a simple £10,000 cash ISA or something like that. You can have two or three lines saying this is what you want to do and the reasons why. And then before you know it, you've got another two pages of all this compliance blurb that points the investor off.

• 34:02Speaker 05

  We're trying to strip all that back. Let's get rid of all this overburdened red tape. And let's start getting it to a position where somebody can come in off the street. They can go and access guidance without having to get embroiled into a whole pile of blurb. That waters down what they're actually trying to do and puts them off.

• 34:25Martin Lewis?

  Okay, let's move on to the next section, which is the basics of investing. Alan, first. Realistically, if you were to start to invest now, what's the minimum amount you would say is realistic for it to be actually worthwhile? Well, I mean, any amount is realistic. You could put in £10 a month, as long as you can afford to put that money away and you hope you get some growth on it. But most people are looking £50, £100 a month a month. What would you say on this one, Valerie?

• 34:51Speaker 06

  You're absolutely right, Martin, in that any amount is better than nothing. So even if you've got a spare £10 a month that you can spare, that you don't need to spend in the short term, then yes, get it invested because actually getting into the good habit of saving into different investments can build up into a very large pot over time. And it's getting into that regular habit of doing it that can make a huge difference.

• 35:18Martin Lewis?

  People are often put off by the final mile on this. I mean, if you really want to start on a small amount, there are a number of robo-investing firms out there, go and look them up, where they will decide, you know, they'll try and skim money out of your current account for you and put it in an investment and they'll decide what the investments are, trying to make it all a little bit easier for small amounts of money. But I mean, there is no amount too small. As long as you've got, always keep your cash emergency fund, always have two or three months of bills in cash in case something happens so that you're able to afford that. But above that, you could start to invest. I mean, let's, I think we've got Aaron on the line. Aaron, are you with us? You've got a question, I think.

• 35:53Speaker 07

  Hi, Martin. I'm here at the moment.

• 35:55Martin Lewis?

  Hello, mate.

• 35:55Speaker 07

  I'm just trying to like get into investing. I just really wanted to understand what the best platform for someone just trying to dip their toes into investing is because I know that the small amount of money I'm going to put in, the fees are going to overwhelm the upside of any investments.

• 36:12Martin Lewis?

  So roughly how much are you talking about putting in and what platforms have you looked at?

• 36:16Speaker 07

  So I was thinking about £100 a month.

• 36:19Martin Lewis?

  Yep.

• 36:19Speaker 07

  I've heard names being thrown around like Hargreaves Lansdown, AJ Bell, Vanguard, but I just don't know which one to pick.

• 36:27Martin Lewis?

  Well, Hargreaves Lansdown and AJ Bell, they are platforms out there that you can put in. They're non-advisory platforms, so you can read a little bit about what's going on and they make it quite simple that you put your money in and choose what's going on. Louise, do you want to take this one?

• 36:40Speaker 05

  Yeah, Aaron, if you go Google, Which, Which have just done a survey 2025, so it's relatively up to date and it lists down lots and lots of platforms. And like Martin said, you've got the key big names there, Hargreaves Landdown, A J Bell, and it does a little bit of a comparison, sort of looking at the costs and the charges and all those sorts of things. Generally, for a hundred pounds a month, that's a really good amount if what you're looking at doing is investing, and by that I mean putting it into something that involves stocks and shares. A hundred pounds is a, twenty five pounds a month, a hundred pounds a month is about where these platforms will start. There's one thing that you might want to consider is that there is a platform called Vanguard. Now, it's slightly different to the others. The A J Bells and

• 37:22Speaker 05

  the Hargreaves Landdowns of this world have got really good portals and they'll create ready-made portfolios for you because at the end of the day, you're not a fund manager, you're not an investment manager, and they'll ask you some questions and they'll come up with a portfolio that suits your risk, that you feel comfortable with. And they look at the whole of the market and have got lots and lots of things on there.

• 37:39Martin Lewis?

  So what that means, the whole of market, that means you can buy shares, you can buy investment funds from lots of different investment providers, both UK and abroad, and you can buy some, you know, gilts and a whole, the whole range of different investments are within their platform.

• 37:53Speaker 05

  Absolutely, whole range of lots of different funds, critically managed by lots and lots of different fund managers, because no one fundage manager can say that they've got the absolute golden bullet for how things work. Vanguard is different. Vanguard is a very good way of accessing something called an index instead. So, common indexes, FTSE 100, S and P 500. You've got to ask yourself, if I pay a fund manager, and you've already alluded to the fact you don't like charges being taken off your money, and why should you? You don't mind people taking money if they're going to do a better job. But if that fund manager, at the end of five, seven years, hasn't actually done any better than the index? Well, what was the point of paying the fund manager? And this is the argument that passive investors will use.

• 38:38Speaker 05

  And what Vanguard do is they have a series of indexes. So it won't ever do better or worse than the index. You're simply tracking an index and it's a very low cost way of doing things.

• 38:48Martin Lewis?

  I think it's a really important thing. I'm going to just come in and make sure that people understand this. So when you have a fund manager, they're a stock picker. So they're employing someone to pick stocks. You might have a fund that is US smaller companies and some stock picker, someone is employed to go and say, I think these are going to be the US smaller companies that do really well over the next five years. I'm going to pick 100 of them and here's how I make my decision. And because of that, that fund has a higher charge than other funds because it's employing people to pick shares for you. An index, let's take the FTSE 250. So that is an index of the 250 biggest firms listed in the UK stock markets. That's how it's decided.

• 39:33Martin Lewis?

  I mean, there are some complexities, I'm keeping it simple. But it's simply the 250 biggest UK firms. So when you invest in an index fund, you just have a computer that is managing and mapping that you are investing in the same proportion as the index that is set up. There's no one picking funds for you. It's just giving you a widespread of that index. And it might be S and P or it might be NASDAQ or it might be, you know, something in Chinese indices. So an index doesn't have anyone picking stocks. It's just trying to mirror a performance of a certain sector or a country. And therefore, when you're investing in it, the fees are lower. Now, absolutely, as we've talked about, if you have a stock picker who's brilliant and gets it right, then it may well be worth paying the fees.

• 40:18Martin Lewis?

  But on average, you're going to struggle. So picking a passive fund, which is one where it's just based off the index, well, while it might not perform quite as well as some managed funds, as the fees are lower, that can really have an impact. So at least you're not paying someone lots of fees if they're going to out underperform. Fair summary, Louise?

• 40:37Speaker 05

  I think that's really well done. 10 out of 10, Martin.

• 40:40Martin Lewis?

  I should do this for a living.

• 40:42Speaker 05

  You should do, shouldn't you? But Vanguard, talking about Vanguard specifically, it's their indexes. It's their indices which are, as you've described, they do not and will not offer you, for example, a Schroder fund, or they won't offer you other fund managers. It is simply indexes.

• 41:00Martin Lewis?

  And it's their own indices that they're doing.

• 41:02Speaker 05

  Well, it's their own, yeah. They're managing and their algorithms are matching that indices. So all you're basically going to have your investment dragged down by is, number one, the cost of the platform which is going to be on, that's very low, and the actual cost of getting someone to put it on to this algorithm. It's, give an idea, it's about 0.15%, 0.2% at the very most compared to a normal fund, I say a normal mainstream fund, which could be as much as 0.7%, 0.8%. So there's a big difference there. Half per cent a year. It's a lot of money.

• 41:32Speaker 06

  It's important to look at how the fees are structured as well, because some platforms will charge a percentage fee, whereas some platforms will charge a monetary fee. It's important to look at exactly how the charges are structured and also whether there's any minimum charges and transaction charges that apply, because on the face of it, it might look cheap, but there could be other transaction charges associated with it.

• 41:56Martin Lewis?

  So, Aaron, this is the important thing to look at. You've got two levels of charges. You've got the platform charges, i.e. the platform that you're buying on, the facility that you're using to buy and sell funds or shares. And then you've got the second one, which is the individual fund charges within it. Now, it is worth saying, with the other platforms like Hargreaves Lansdown and AJ Bell, you can buy index trackers within them as well, and they might include even Vanguard. But whereas Vanguard, you're going to have the low platform fee because you're just buying its own index trackers. What's your thinking on this? Where does this all leave you? Have we confused you? Have we made it easier?

• 42:30Speaker 07

  You've made it easier.

• 42:31Martin Lewis?

  Aaron, one thing I would say to you, there are a few more challenger investment platforms out there which are pretty low cost, like your trading 212s, your InvestEngine, Free Trade, which have different types of fees. Your AJ Bell's, Hargreaves, Lansdowne, Interactive Investor and Fidelity are more established platforms with higher fees. But Vanguard, if you're just going to go for Vanguard funds, can be a lower option. The difficulty here, let me be really honest with you, Aaron. Right. And one of the problems in doing this pod is regulations mean it is difficult to give you a recommendation because you haven't had a financial fact find. Someone has not sat down with you and found all your considerations. So getting someone to actually say which is cheapest is quite tough. My biggest advice

• 43:13Martin Lewis?

  for you, don't be put off investing because of this. Don't be put off investing because of the final mile. The differences between these funds and these platforms is not that big compared to the difference of you not investing. So if, just go for it. If it's right for you, go for it. Do you understand what I mean by that?

• 43:31Speaker 07

  Yeah, no, that makes sense.

• 43:33Martin Lewis?

  You know, it's not going to be that prohibitive. There are lots of choices. Trading 212 has no cost, no fee to buy yourself funds, no fees to buy or sell shares, can be managed online or an app. InvestEngine is similar. You may find those to be the easiest way once you know what you want to do. But buying yourself, getting yourself a nice spread of investments in index funds is a good way to start with your £100. You know, it's cross your fingers money, I hope. That's how you're approaching it and hopefully it will work well for you in the long run.

• 43:58Speaker 07

  That's very useful. Thank you.

• 44:02Martin Lewis?

  That's it for this week and this savings and investment best of pod special. If you've enjoyed it, tell your friends you've been listening to the Martin Lewis podcast. We tend to put a new episode out every Thursday, so why not suggest they subscribe to that too?

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