A beginner’s guide to investing… who should, how much & where to do it

Martin Lewis on Saving v Investing: which is right for you and how to do it… In this special podcast Martin is joined by two professional investment advisers to talk about: - What is going to happen to the ISA limit. - Whether you should be saving, investing or doing a combination of the two. - A beginners guide to investing and where you should put your money for the long term. - What type of investment firm you should be looking at. - Martin also gives an explanation of Bitcoin and what could happen if you want to invest in it. Get in touch with the podcast by emailing [email protected] mailto:[email protected]

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

• 0:00Martin Lewis?

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• 1:10Martin 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. But this week with the Open Golf on, it's podcast only, just for you. So I wanted to do something special. We're talking about a subject I don't normally talk about today: investing. And I'm going to be joined by two professional investment advisers that I can put your questions to. In today's pod, what's going to happen to the ISA limits? When should you save and when should you invest? Or perhaps, you should do both. We've got a beginner's guide to investing and where to put your money for the long term.

• 1:54Martin Lewis?

  What type of investment firm should you be looking at? And yes, Bitcoin gets a mention too. Let's get on with it. I'm excited. Play the theme tune.

• 2:22Martin Lewis?

  Okay, now normally when I'm with Adrian, we tend to start the podcast with a little bit of chit chat about what's happened during the week. Now, the big thing that happened to me is I went for my first contact lens lesson. It's taken me a while to embrace the fact that since the age of 45, I needed glasses for reading. And I thought, alright, I'm gonna go and try contact lenses, absolutely petrified of the whole concept. I went in, I had my appointment, a very patient man sat there explaining what I needed to do, and I tried to put those little plastic things into my eyes 40 times. But I could not hold my eye open and stop myself blinking. I could not do it. So it was an abject failure. I've not given up, I am gonna try it again, but I just don't know how people do it.

• 3:06Martin Lewis?

  It seemed an impossible task for me. And I suppose that's a rather interesting segue to the short-sightedness, in my view anyway, that the government had by thinking that if it cut the cash ISA limit, you see what I've done there? Contact lenses to cash ISAs. You cut the cash ISA limit, it would encourage more people to invest. That was what was being talked about. Now, I've mooted in the past before that I had discussions, as Emma Reynolds mentioned it in Parliament the other day, that she had met me and we'd chatted, I can now say it. I've had a couple of meetings with the Economic Secretary to the Treasury about this. The first time I met, when they were still looking at announcing that they were going to cut the cash ISA limit, I was very much in opposition.

• 3:49Martin Lewis?

  I didn't feel it was the right or an efficient way to achieve their aims. And it's important to understand what the aims of the government are, because that fits into what we're doing in the big podcast today. The aims of the government to try and encourage more people, especially younger people, to invest. Two-fold reasons for that. The first is, if you have a broad spread of preferably global assets, I think they would probably want UK assets, but I'm going to say global assets, over the long run, five, 10, 15, 20, 25 years, on the balance of probability, it will likely outperform substantially putting your money into savings. Which means, people would be better tooled up for their future and have a greater stack of savings if they invested more than they saved. And I'm in favour of that.

• 4:34Martin Lewis?

  It also means, some of that investment would go into UK stock markets. The UK stock market is struggling against international competition at the moment. Companies tend to get better price-to-earnings ratios when they float on other stock markets. And that it has an impact on our economy and the amount of tax that comes in. So you can see why the state wants to do it, and I'm generally supportive of its aims. My problem is, I don't think that cutting the cash ISA limit would do that. All I think would happen is, people would suddenly have to put their money in normal savings and pay tax on their normal savings. Now, the crucial thing to me, was what I was told is, absolutely categorically, this is not about trying to raise revenue. If you are trying to raise revenue, then yes, one way to do it would be to cut the ISA

• 5:19Martin Lewis?

  limit and the stocks and shares ISA limit, then people would pay more tax on their savings and investment. This was trying to be a form of nudge economics to get people to invest more. Now, just the basics on this. You can currently put £20,000 into an ISA each tax year. Once it's in, it stays tax-free year after year. So you put 20 grand in this year, well, if the limit stays the same, 20 grand in next year, 20 grand in the year after that, you'd have 60,000 plus any investment growth or interest that you got on top of it. So an ISA is a really good form of protection. What was being mooted, was that you'd keep the investment ISA limit at £20,000, but you would restrict the amount you could put into a cash ISA. Some set as low as £4,000. I've been told categorically, it was never being considered to drop it as low as £4,000,

• 6:04Martin Lewis?

  but maybe my numbers, not theirs, it might be £10,000 or £15,000. Now, of course, my argument was, well, first of all, for older savers, that's punitive. You don't want them to put money in investments, but you're still going to cut their cash ISA limit. Anyway, all those discussions were had. Where are we now? The Mansion House speech, which is where the Chancellor was going to announce this cut, happened on Tuesday. There was no mention of cutting the cash ISA limit in it. However, I have been told on the record, they will continue to consult on reducing the cash ISA limit. So this is not off the agenda. In my view, what they should be doing is education and encouraging people to invest,

• 6:49Martin Lewis?

  and they are planning to start a new advertising campaign and a new education format next April, which is good news. They need to make it easier to provide guidance so that people can get more one-on-one help about what they're investing in. They are planning a new form of intervention, which can come from banks and other financial services providers to tell people who are saving that they should be investing more. I have some slight worries about that, because I think if banks are sending nudge information to young savers to put money in shares, while the idea is good, if they're going to do it in bank-based investments, I have real concerns because they're not particularly competitive and it should be based on an open market format. And I also think they should be looking at incentivising younger savers to put money in the market in a way that doesn't currently

• 7:31Martin Lewis?

  exist, which is why I came up with the concept that I've pushed to them and then said this to them in meetings, of a starter investment ISA allowance. So within your main investment ISA, the first one or two thousand pounds say that you put into the investment ISA, the state could organise that you got a five or 10% boost onto that investment as long as you held it for a certain period. So let's say you put two thousand pounds in, you've got a 10% boost, you'd have two thousand two hundred pounds to invest. That would do a couple of things. Once, it would encourage more money, it'd be a talking point, something someone like me could start talking about, saying, "Well, there is this special advantage in ISA." And once people start to get the idea that investing is good for them, that could work well. And this shouldn't cost very much, first of all, because the amounts

• 8:16Martin Lewis?

  aren't particularly big, but second, because many of the big financial institutions do these type of cash back incentives anyway. This is just a way of formalising it, so you could ask the investment firms to pay for a chunk of that incentive money. We already have huge tax breaks out there for wealthy investors on things like enterprise investment schemes or seed enterprise investment schemes, so why not do the same for young people to encourage them to invest? In other words, you can probably hear from what I'm thinking, it should be about the carrot. Not about the stick. So we're going to move on to our investment specialist in a moment, but I just wanted to say one more thing while we're talking about it. I feel

• 9:00Martin Lewis?

  sort of a sense of responsibility for the messaging that saving is better than investing. And there's a simple reason for that. Investment is not within my professional expertise. Now, I do do it myself. I am keen on investing. I think it's a good thing for people to do. But it's not within my professional expertise. It is a regulated area that I don't talk about. However, saving is within my professional expertise. So in all of my programs and my outlets and on my website, I focus on the saving side, not because I think it's superior to investing, but because it's what I do. And I do worry that over the years, that has given a message to people that saving is the right thing to do in every occasion. Now, I do, and I have always mentioned that investing should be looked at, but maybe not

• 9:45Martin Lewis?

  as strongly as I should have done. So one of my reasons for doing this podcast today, and for this being the subject, especially at this crucial time when we've just had the debate about cutting the cash ISA and moving it towards investment, and I can feel the pressure, is actually, I've been thinking very hard, how do I play my part in future about communicating that people should be looking at investment and play a role in helping people understand the importance of investing without crossing that regulatory line, while it would be helpful if the regulatory line was moved a little bit, so this wasn't as difficult to have to wangle your way around. And today's podcast is part of that. So what we're going to talk about is saving versus investing.

• 10:29Martin Lewis?

  When you should do one, when you should do the other, what are the pros and cons, how they work, how do you start investing, where do you start investing, what the best investments are, as much as the regulations allow my guests to say. That was an introduction. Let's get on with the pod.

• 10:47Martin Lewis?

  Okay, so I'd like to welcome first of all Valerie Wilson, who is a chartered financial planner at Johnson Carmichael Wealth. Valerie, hello.

• 10:55Speaker 04

  Hello.

• 10:56Martin 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 the very basics and don't know what an independent financial advisor is?

• 11:11Speaker 04

  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.

• 11:40Martin 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?

• 12:00Speaker 04

  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.

• 12:12Martin 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 for them. 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?

• 12:30Speaker 04

  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 too 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. And get your losses back.

• 12:50Martin 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?

• 13:22Speaker 05

  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 their 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.

• 14:00Martin 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.

• 14:41Martin Lewis?

  Stephen says, I'm saving to retire in a few years. It's just 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. You can be earning 5% interest on your savings right now. So if you're earning 1%, 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

• 15:21Martin Lewis?

  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 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. But 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,

• 16:05Martin Lewis?

  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. 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?

• 16:25Speaker 04

  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

• 17:09Speaker 04

  time is actually going to go down. So on paper, it might be the same pound, but the buying power is substantially less. So that is risk in itself. So.

• 17:17Martin 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 returns.

• 17:27Speaker 04

  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.

• 17:44Martin 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

• 18:27Martin Lewis?

  putting money 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.

• 18:47Speaker 05

  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.

• 19:30Martin Lewis?

  Right, I'm going to attribute that. 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?

• 19:50Speaker 05

  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.

• 20:08Martin 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?

• 20:16Speaker 05

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

• 20:23Martin 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.

• 20:41Speaker 05

  Yes, that's correct, yeah.

• 20:42Martin Lewis?

  And the last one, commodities?

• 20:44Speaker 05

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

• 20:48Martin Lewis?

  Chocolate, sugar, pork 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?

• 21:32Speaker 04

  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.

• 22:13Martin Lewis?

  Can you explain that term for us?

• 22:14Speaker 04

  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, 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.

• 22:46Martin 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?

• 23:05Speaker 05

  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.

• 23:26Martin 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.

• 24:03Speaker 04

  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-

• 24:17Martin Lewis?

  I can pretend that, I can pretend that.

• 24:18Speaker 04

  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

• 25:02Speaker 04

  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.

• 25:27Martin 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.

• 26:00Speaker 04

  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,

• 26:43Speaker 04

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

• 26:49Martin 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.

• 27:21Speaker 04

  That's exactly it. There's a posh word we use in the industry, 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 based, starts to increase. So it reverses back again.

• 27:48Martin Lewis?

  Okay, so I'm just going to read a couple of comments that we've had on this because people have some really vociferous opinions. And I think some of this is because it's become political at the moment with Rachel Reeves at a Manchin House speech saying we need to get more people to invest. 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

• 28:31Martin Lewis?

  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 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.

• 29:15Martin Lewis?

  So, risk, when you take high risk, the hope is you're gonna get high growth. The cost is there's a potential that you're going to lose some of the money that you put in. And just understanding that risk shouldn't always be seen as a negative. Risk is something, sometimes an opportunity. It's 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?

• 29:53Speaker 04

  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.

• 30:38Speaker 04

  We're trying to strip all that back. Rachel's absolutely right. 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.

• 31:02Martin 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. What would you say on this one? Valerie?

• 31:29Speaker 05

  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.

• 31:55Martin 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.

• 32:30Speaker 06

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

• 32:32Martin Lewis?

  Hello, mate.

• 32:32Speaker 06

  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.

• 32:50Martin Lewis?

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

• 32:53Speaker 06

  So I was thinking about £100 a month.

• 32:56Martin Lewis?

  Yep.

• 32:56Speaker 06

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

• 33:04Martin 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?

• 33:17Speaker 04

  Yeah, Aaron, if you go Google, 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 £100 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. £100 is about £25 a month, £100 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

• 33:59Speaker 04

  Bells and 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.

• 34:16Martin 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 the whole, the whole range of different investments are within their platform.

• 34:30Speaker 04

  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&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.

• 35:15Speaker 04

  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.

• 35:25Martin 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.

• 36:10Martin 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

• 36:53Martin Lewis?

  and gets it right, then it may well be worth paying the fees. 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?

• 37:14Speaker 04

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

• 37:18Martin Lewis?

  I should do this for a living.

• 37:19Speaker 04

  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.

• 37:38Martin Lewis?

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

• 37:40Speaker 04

  Well, it's their... Yeah, their 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 onto 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 percent a year. It's a lot of money.

• 38:09Speaker 05

  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.

• 38:33Martin 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 Lansdowne 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?

• 39:07Speaker 06

  You've made it easier.

• 39:09Martin 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 Invest Engine, 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

• 39:50Martin 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?

• 40:09Speaker 06

  Yeah, no, that makes sense.

• 40:10Martin 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. Invest Engine 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.

• 40:35Speaker 06

  That's very useful. Thank you.

• 40:37Martin Lewis?

  Cheers, mate.

• 40:41Martin Lewis?

  Now, we interrupt this podcast to say, stop. Collaborate and listen. Yeah. ISA, ISA baby.

• 40:52Martin Lewis?

  I thought it was worth just talking to you for a moment about individual savings accounts. ISAs, they are designed to encourage saving or investing. As we've already discussed, they give you a £20,000 allowance per taxpayer to either save or invest or a combination of both. Now, as we've talked about cash ISAs many times before on the show, as I always say, it's just a savings account you never pay tax on. That's all it is. And crucially, your interest doesn't count to the personal savings allowance, the amount that you are allowed to earn each year in interest from any form of savings, tax-free. So, basic 20% rate taxpayers can earn a thousand pounds of interest, tax-free. Higher 40% rate taxpayers can earn 500 pounds a year, interest,

• 41:37Martin Lewis?

  tax-free. But any interest from an ISA doesn't count towards that. It's an additional allocation. But what I don't often talk about are investment ISAs. And what is the benefit of putting your investments inside the ISA wrapper? Well, there are two. The first is there's no capital gains tax. Capital gains tax is a tax on the profits you make when you sell something for more than you bought it. So, for example, if you buy shares at one pound and you later on sell them for five pounds, you have made four pounds profit. That four pounds is subject to capital gains tax. Now, you're usually allowed a gain of 3,000 pounds per person

• 42:20Martin Lewis?

  per tax year before you pay any tax. That's not on an individual transaction. That's your total amount you can gain each year. So, if you make profits or you crystallise profits of 3,000 pounds in a tax year, there's no tax on it. Above that, basic rate taxpayers pay 18% tax, higher and top rate taxpayers pay 24% tax. So, it's interesting, it isn't it? The tax you pay on capital gains, on profits, is less than the tax that you pay on income. But what this means is if you invest a decent whack of money, so you're putting quite a lot of money into investments and it grows well, you could find yourself having capital gains tax to pay. More so, even if you put a small amount of money in and you were lucky enough 10

• 43:05Martin Lewis?

  years ago to have picked Tesla and it's gone up hugely in value and then you've sold it and you made a big gain because it's the year that you sell it that the capital gains tax accrues. Even if you bought it three years ago, you sell it all this year, the capital gains tax is in this tax year, then the protection from capital gains tax may be really useful for you. The second benefit is there's no tax on dividends. Now dividends happen when firms are too profitable, pay out income to shareholders each year in the form of a dividend. So you might get a three pence per share dividend. Now if you hold 10,000 shares, that becomes a quite substantial amount of money. And within an ISA, there's no tax on dividends. Outside of an ISA, when you pay dividends from shares or funds, usually the first £500

• 43:49Martin Lewis?

  a year is tax-free, but above that, you'll pay 8.75% tax as a basic rate taxpayer, 33.75% as a higher rate taxpayer, and 39.35% as an additional rate taxpayer. So those are the benefits for putting your investment inside an ISA. And if you're hoping to put substantial amounts of money away over the years, you may well want to look at putting your money in an investment ISA ahead of using a cash ISA, because if you do get the substantial growth on your investments and you're easily going to use up your £3,000 a year capital gains tax allowance, well, the amount that you save on tax using an

• 44:32Martin Lewis?

  investment ISA could outperform even a cash ISA. But if you're not going to put anything in investments, you may as well just use your cash ISA. ISA ISA, baby!

• 44:48Martin Lewis?

  So Gerry has a question. "How do I minimise the risk of losses while attempting to get at least investment returns equivalent to savings account rates? I am a complete novice." So Valerie, what would you suggest to her? She obviously wants some very cautious funds, but wants to beat savings account, but is scared of losing any money. Where would you go?

• 45:08Speaker 05

  What I would say is to hold as diverse a portfolio as possible. So by holding individual... And company shares, you're more likely to see the value go up and down. However, if you hold a diverse portfolio across different assets and geographical locations, then you will still experience some ups and downs in your investments. But you're unlikely to see the same level of volatility. And over the longer term, we expect it to outperform cash.

• 45:36Martin Lewis?

  Now, I'm gonna, I'm gonna push you, Valerie, and I know this is different regulatory. Could you give us the type of sectors or countries that you would be looking in to get that wide spread of risk? I mean, just, just some names. I know you can't do individual providers, but would you be looking at a global index fund? Would you be looking at US, UK? Would you be looking to go spread? Or would you be looking smaller companies, bigger companies? What would you do?

• 45:59Speaker 05

  Yeah, so there's different ways to get exposure to different sectors and locations. One way of doing this is to invest in individual sector funds. But actually, one good way of doing it is investing in what's called a multi-asset fund. So a multi-asset fund will set the allocations for you. And so you don't need to keep an eye and change the allocations to, for example, the US versus the UK over time. That is all done by the professional fund manager. So that's a good way to get exposure to wide range.

• 46:32Martin Lewis?

  So Valerie, give me an idea of the type of firms that offer them. I know these aren't recommendations, but so people have got the names, the type of fund managers that would be offering those multi-asset funds.

• 46:41Speaker 05

  Yeah, so some larger companies you've probably heard of are Vanguard that we've discussed already, and Blackrock and Legal in general are quite well-known names that offer these types of funds.

• 46:51Martin Lewis?

  Okay, so that would be a good place for Gerry to look. Now, we're going to move into my investment-specific section. People asking more specific questions here. Let Karen, I think we have Karen as a caller.

• 47:01Speaker 07

  Yes.

• 47:02Martin Lewis?

  What's your question, please, Karen? Hello.

• 47:04Speaker 07

  My husband and I have just, well, we're selling a buy-to-let property that we had. And when we've paid all the taxes and done what we need to pay our, our family home's mortgage off, we'll be left with about £200,000. And we need really to find out a way of getting an income, a monthly income from that. We don't know where to put that £200,000.

• 47:31Martin Lewis?

  So first of all, I mean, let's just be plain, what we're actually doing is swapping asset classes here. You had a property form of investment and you're looking to swap it, I presume, into a stocks or shares or gilts or bonds type of investment and you're looking to get some income out of it.

• 47:44Speaker 07

  Well, we're complete novices at what we should do with it really, but yes, I suppose.

• 47:51Martin Lewis?

  Well, I'm going to say, and I don't mean this in a bad way, at that type of level, I would probably be paying for individual financial advice for someone to work it through for you. But let's try and get some starter ideas from our two specialists here. Let's start with Valerie.

• 48:07Speaker 05

  Yeah, so the starting point when making any sort of investment is making sure you've got that cash emergency fund. And then anything above that can be invested. So what you should look at is your risk profile, the time scales for accessing that investment, whether you want that income straight away or whether it's a future income.

• 48:28Martin Lewis?

  So where are you on that one, Karen? How long can you lock this money away for without touching it? And do you need the income straight away? And what type of income are you looking for?

• 48:35Speaker 07

  Well, we do need the income straight away really, because we'd be losing the income from the house that we're selling.

• 48:42Martin Lewis?

  What was the yield on the property? What income were you getting each month or each year?

• 48:46Speaker 07

  Well, we were getting £1,300 a month, but we had costs associated with the property, of course, and all the upkeep of it and the insurances on it and any repairs and just general managing of the house. So.

• 49:07Martin Lewis?

  So let's say you're looking for income in the sort of 3% or 4% a year type bracket, that type to mimic buy to let. So what type of things should be looking at? There are income funds, aren't there, Louise?

• 49:19Speaker 04

  Yes, they are. If you don't want to have risk, in other words, you don't feel as if you're able to commit the capital for at least seven, you know, five to seven years, and you do just want to know that it's safe and not going to go anywhere, you can look at the National Savings. Now, I like National Savings, they're backed by HMG Treasury. They have a one-year income bond at the moment. That's fixed. It gives you 3.98%. Or if you want to invest a little bit longer for two years, that's 3.79%. Now, the good thing is is that they will pay that pays it down monthly to you. And more importantly, when it gives you the money, it goes into your bank accounts and it's paid gross. In other words, they haven't taken the tax off. Now, if you you and your husband have got unused tax allowances, this is a really good way of getting

• 50:03Speaker 04

  the cash in your hands without the tax being deducted. If you do have to pay tax, obviously you can sort that out a little bit later on and pay the taxman back. We do self-assessment, yeah. Okay, so there's an easy way to do it.

• 50:13Martin Lewis?

  I'm going to disagree with you, Louise, I'm afraid.

• 50:16Speaker 04

  Oh, go on, why that?

• 50:17Martin Lewis?

  Because I think if you're going to put money away in a in a one-year bond with income, you've got. Remember that every UK financial services protector is protected by the financial services compensation scheme up to 85,000 pounds. So if you don't put more than 85,000 pounds in it in a place, you can get 4.58% fixed with GB Bank and it pays income monthly, you can opt for it.

• 50:36Speaker 04

  I have a special surprise for you, Martin.

• 50:38Martin Lewis?

  Stream Bank at 4.52%, go on, carry on.

• 50:41Speaker 04

  I have a special trick up my sleeve, it's called a cash platform. Now, what a cash platform is, is Karen, the worst thing about having cash and opening lots of different bank accounts for 85,000 pounds is it's cumbersome, it takes time and it's it's administratively cumbersome. There are special platforms that you can get where you you put your money in, let's just say 200,000 pounds with into a platform. And what you can do is that platform provider will direct 85,000 pounds into a multiple range of different bank accounts, all offering high rates of interest, up to five, 5%. So you've got lots of different high-rate paying bank accounts, but only got the administrative burden of having one platform.

• 51:22Martin Lewis?

  Again, sorry to argue with you, barring one product at the moment, which is in the five-year fixed category, none of Raizen, Hargreaves Lansdowne or Flagstone, which are the platform providers, have accounts that beat the best buys on the market. So I absolutely agree that platforms can be very useful if you want to do it easily. But as we're talking 200,000 pounds, we're only talking two or three accounts locked away for a year. I'd probably just go with the highest rates, to be honest.

• 51:43Speaker 04

  Okay, I'll concede and I'll accept that point, but there's one other thing that I haven't mentioned. Let's just get back to National Savings. We spoke about tying the money up, those income bonds, one, two years. If you want to just have the money accessible, they do do another income bond and it's easily accessible, it's instant and they give you 3.26. So not as much of the individual bank accounts that Martin's spoken about and also the one, the fixed ones, but there is an instant access one that National Savings do.

• 52:08Martin Lewis?

  So it's interesting that you as an advisor have gone for a savings, not an investment platform. I mean, you're talking about locking away for one year, the fixes, the rates on fixes drop as we go longer at the moment, which is a reverse of where we were about a year ago. You wouldn't suggest doing it into some form of investment?

• 52:23Speaker 04

  Well, it depends if Karen and her husband want to have some sort of investment risk for part of their investments for the future. Karen, what sort of timeframe are you looking at investing and how do you feel about having part of your investments that go up and down in value? Or do you want it all just completely secure?

• 52:38Speaker 07

  Well, we could split it with a hundred thousand something safer and a hundred thousand in something that, you know, we do have some risk. Yes, I mean, we could do that.

• 52:51Speaker 04

  This comes back down to Martin saying, you really need to get some independent financial advice. But if you're looking at perhaps having some in cash and some in investing, you've got ISA allowances that you can both use up 20,000 each, you could have 40,000 in cash ISAs and then you can put some into, the remaining amount into a cash deposit account that's worth £100,000, £85,000. But then you can then look at getting some financial advice for investing in a nice range of stocks and shares.

• 53:17Martin Lewis?

  Wouldn't you use your ISA allowance for the investments ahead of cash ISAs?

• 53:20Speaker 04

  Not necessarily. I think what I'd do is I'd sit down and look at what the potential yields would be on the type of investment that Karen chooses over the cash that she's with. It depends what she's wanting. The equity ISAs, where they're good is you don't have to pay capital gains tax.

• 53:37Martin Lewis?

  Yeah, it's a big bonus, yeah.

• 53:37Speaker 04

  And then they've both got capital gains tax allowance of £3,000 each. But if you're only investing £100,000, then you have to do a little calculation. Like I said, it's a bit too much to sort of do without actually getting some sort of more wider discussion with a financial advisor. You need to do that arithmetic come back of a fag packet, so to say.

• 53:54Martin Lewis?

  And so let's just go for your £100,000 caution investment, what type of things should people be looking at?

• 53:59Speaker 04

  Well, £100,000 then, you can get ready-made portfolios, which are more cautious in nature. Those will probably invest in the more mainstream markets like UK, US and bonds, which means that they're not quite as volatile. If you want to go at the upper end of the risk spectrum, you'll find that there are more foreign markets in there and nuanced sort of industries like sort of tech, AI industries in Japan and those wider sort of foreign clients. So get a ready-made portfolio, that would be probably my sort of way of doing it. Um, it's very complicated.

• 54:31Martin Lewis?

  It it sounds it, and and one of the reasons you go for this amount of money to independent financial advisor. But if we sum it up, what we're saying is put some money in a top fixed rate savings account, about £100,000. And that make sure it's one that pays monthly income. And there's a whole range and there are websites out there that I'm not allowed to mention that will detail what income that you're going to be able to get from each of those are. And then for the range of investment, I mean, ultimately, again, you could go and get independent financial advice. Well, they will tell you what to go in. Otherwise, go and find yourself a nice broad index and get yourself an index fund or a combination. You might want to put something in the UK, something in the US, something global, something as a spread that has a big widespread of investments and cross your fingers.

• 55:13Martin Lewis?

  And hopefully, if you're putting this away for five or 10 years, it will substantially outperform your savings. That's a simple way to say it. The problem is almost, it's almost that people sit there and they're paralyzed by choice. There's too much choice, and I'm afraid that's one of the difficulties that they have in some ways. The thing to remember is, as long as it's a nice broad spread, the sin of not doing anything is bigger than the sin of doing something that isn't the very best option. Does that make sense?

• 55:39Speaker 04

  That's what I'm worried about.

• 55:40Martin Lewis?

  Yeah, well, stop that, forget that, forget that. Don't worry about, don't, what you can't, in 10, I guarantee, whatever you put your money in, in 10 years' time with hindsight, will not be the very best return. Your question is not that. Your question is would it be better than just leaving it sitting in savings? And if you leave it sitting in 10 years, on the balance of probability, no guarantees, you could lose money. On the balance of probability, if you pick a very widespread of investments, like indices, index funds, which you talked about earlier.

• 56:11Speaker 07

  Thank God, you were mentioning.

• 56:13Martin Lewis?

  That's one of them, yeah. And it has different places, you know, US trackers, all these different trackers. On the balance of properties, that will outperform savings. What we don't want is analysis paralysis. In a way, just go for it.

• 56:26Speaker 07

  Okay.

• 56:27Speaker 05

  I suppose the important thing with when starting out with investing is there's actually three distinct areas. So there's the platform in which you invest, there's a product in which you invest in. So for example, your stocks and shares ISA or your pension, and then there's underlying funds. So there's those three different elements that come together to kind of create that investment for you.

• 56:50Martin Lewis?

  Perfect. We wish you the best. Right.

• 56:53Speaker 07

  Thanks very much.

• 56:54Martin Lewis?

  Thank you so much. Thank you for coming on and asking your question. I hope it all goes well. Come back in 10 years' time and let us know how you did.

• 57:02Speaker 07

  Yes, okay. Thank you.

• 57:07Martin Lewis?

  Right, I want to do some quick fire now about investment specifics. Chris asks, what is the benefit or otherwise of EFTs or ETFs, I think he means, over standard funds? Valerie?

• 57:15Speaker 05

  Yeah, so ETFs are passive, but as we said, there's some other passive OICs and unit trusts.

• 57:22Martin Lewis?

  An OIC, by the way, is not a smelly person who's beneath you. It's an open-ended investment trust, is that right? No, no, open-ended investment.

• 57:29Speaker 05

  Company.

• 57:30Martin Lewis?

  Open-ended investment company, that's what an OIC is, yeah.

• 57:33Speaker 05

  So ETFs, so they're low cost and they're passive, so it can help you create a low-cost portfolio.

• 57:41Martin Lewis?

  But an ETF is actually a share, isn't it? Is that right? That you're sort of buying a share in a fund, rather. Unlike others which are set up as widespread of funds, an ETF is you buy one share and its price moves up and down based on the underlying investments. Is that correct?

• 57:56Speaker 05

  Yes, that's correct. And they're traded throughout the day, whereas unit trusts and OICs, for example, are traded daily rather than continuously throughout the day.

• 58:04Martin Lewis?

  So the benefit is that they're low cost and the price moves more rapidly?

• 58:08Speaker 05

  Yes, that's correct, yeah.

• 58:09Martin Lewis?

  Okay, Judith says, love to hear more about guilts and the best platform to buy them with without needing an advisor. Now, a gilt is a government bond, the government is providing security. One of the advantages is you don't pay capital gains tax. Now, funnily enough, I've been working on an article myself recently, where, I haven't published it yet, where if you buy short dated bonds, so you know you've only been buying them for a couple of years, and you know what the interest rate is, and you know what they'll perform, because of the tax advantages, they can actually outperform savings accounts. So, let's go to Louise. Talk us through those.

• 58:42Speaker 04

  Hi, yes. It's actually quite difficult for a direct investor to go and buy a gilt, per se. What I would probably look at doing is, there are a range of, they're called discretionary managers. There's a company called Evelyn, for example, and they will, if you give them your money, they will buy a basket of guilts that are short dated, i.e. less than five years, and they will manage that for you. So, they'll jump in and out as is needed. But I would, for guilts, it's something that I personally, and I'm an expert, would not go and buy one myself. I'd go to a gilt fund manager. Evelyn is a good example of a fund manager that would give you a gilt portfolio.

• 59:23Martin Lewis?

  Although if you're buying short dated guilts, you can buy them on the platforms like Hargreaves Lansdowne and AJ Bell.

• 59:28Speaker 04

  You can, but, like I said, you're having to sort of look at the dates and the maturity values, and if you go to them, I think guilts are quite a specialist. It's not something that I personally would do myself.

• 59:40Martin Lewis?

  I have done it myself.

• 59:42Speaker 04

  But, Martin, you are a financial guru. How did you feel about doing it and making the decisions and understanding things, terms like par and yields?

• 59:52Martin Lewis?

  Because I was buying short dated guilts, so I knew what the value would be at maturity, I knew what I was paying for them, I knew what the interest was. I could do a back calculation of giving myself a compound interest return and comparing it to savings on the tax. So, and that's what the guide that I'm planning to publish at some point, but I haven't got there yet, will explain to people how to do. But it is something that you really need to understand before you do it yourself, as with all these things.

• 1:00:15Speaker 04

  That's exactly the point. If you've got the knowledge to be able to do that, then do it. If you haven't, there are fund managers that will do that for you. And gilt portfolios are generally a lot, lot cheaply charged than, you know, equity portfolios. The fund managers don't take a lot from it.

• 1:00:30Martin Lewis?

  Look, I was waiting for this question, and I've had two, and they say the same thing, and I know where you're coming from. Vlad and Freddie. Vlad, what's the best performing asset over the last 20 years? What is your recommendation? Save or invest in it? Freddie, what has been the best performing asset over the last 10 years? And do you think it will be the best performing asset of the next 10 years? These are Bitcoin questions. By the people who wrote them, I saw it. These are questions about Bitcoin. Are either of you going to talk to us about Bitcoin as an investment?

• 1:01:00Speaker 05

  No, it's not an area of expertise for me. It's an unregulated advice area. And yeah, it's not something I would have that much knowledge on.

• 1:01:12Martin Lewis?

  Louise?

• 1:01:13Speaker 04

  I would agree on the basis that a financial advisor will look at mainstream, generally regulated investments with compensation schemes in the UK. A Bitcoin has none of those things. You buy it, you risk it, you can't sue anyone if you got it wrong.

• 1:01:28Martin Lewis?

  So Bitcoin is effectively technically speculation, not investment, because investment generally needs to have a form of income that you can earn from it. That isn't a value judgment, it's just a definition. So you're speculating that if you buy Bitcoin and you don't have to buy a whole Bitcoin, you can buy funds in Bitcoin and you can buy small amounts of Bitcoin. You're hoping that someone, its value will go up so that when you spend it, you can, its value is greater than when you bought it. And over the past 10 to 20 years, it has gone up in extreme amounts. And there are people out there who have made large amounts of money in Bitcoin. But the whole strength of Bitcoin as an investment is its volatility, is that it moves up and down really rapidly. Now, many people have different views on Bitcoin.

• 1:02:11Martin Lewis?

  Some see it as a currency, some deny that it's a currency. Some see it as a store of value, and certainly it has been a store of value, and it has gone up traditionally over the years. Some see it as a way of moving away from fiat currency, state-based currencies, into a form of, you know, consumer-led worldwide, not looking at the way that general governments move, form of currency. You can think of it as all those things, I don't want to get involved. You could equally think of it as, I'm going to buy it on the greater fool theory. I'm going to buy it on the idea that a greater fool than I will be willing to pay more for it than I did in a few years' time. Whatever your philosophical view of Bitcoin, it has gone up very substantially.

• 1:02:54Martin Lewis?

  But it isn't regulated, it is outside the general form of regulation. You hear the reticence of our financial advisors to talk about it. So, two rules. One, if you're buying Bitcoin, understand that it is money you can lose and you should not be putting in any more money than you can afford to lose. Number two, there are a lot of Bitcoin scams out there. I am the face of many of them. They use my face to try and get you in things called Bitcoin coder. If you're going to be buying Bitcoin, do your research, go to a proper rated exchange, buy an amount, make sure it's safe, do not click anything online that's advertising to you to buy Bitcoin.

• 1:03:37Martin Lewis?

  I mean, some of the big name, this is not a recommendation because I haven't researched it, but some of the big name exchanges are the likes of Coinbase and Binance and BiByte and Upbit, but be very, very careful that you know what you're doing. Don't rely on what I've just said. Alternatively, we talked exchange traded funds before. We have now seen Sweden's had exchange traded funds in Bitcoin and other cryptocurrencies for a long time. The US, I think, has started to deregulate and allowed exchange traded funds. So you're actually buying it through a stock market mechanism. So, financial advisors aren't going to advise you on it. It is highly speculative, highly risky. It may well make you a lot of money, it may well lose you all your money. You have to understand that before you go into it. It is certainly not something you should be putting the majority of your assets in, unless you want to take an extremely large amount of risk.

• 1:04:22Martin Lewis?

  But equally, many people have done very well because its price has shot up over the years and I need to be honest about that rather than hiding it. A final thought, be very careful of social media on Bitcoin. There have been a lot of social media influencers who were trying to target young people to put their money in there, some of which have been done on the back of it and they've been paid to do so and it isn't necessarily because it's in your interests, it's in their interests. And there are also other people out there who promote Bitcoin very strongly out of a political ideology and they want it to be done on a political, a sort of libertarian, an economic libertarian type of ideology. Again, if you're going to put money in Bitcoin, do your research, understand that it should be a limited amount of your asset allocation and know the risks.

• 1:05:06Martin Lewis?

  And if you're unsure, don't do it.

• 1:05:11Martin Lewis?

  And I've got one final question I want to put to you. I've got about 40 I haven't done, but it's been really fascinating. Thank you both. But I thought I'd ask this one because it's wonderful to have you both to help me answer this question. Ian says, "There has been a lot of discussion about the potential reduction of the cash ISA limit." Well, we know that. It's not happening for now, doesn't mean it may not happen in the future. "What is the difference between a cash ISA and a stocks and shares ISA invested in money market funds?" So let me just break something out before we get to that. There are a number of platforms of stocks and shares ISAs that allow you to keep money in cash, that it is protected in the same way as a deposit account. They're designed for you to leave your cash sitting there, holding while you decide what to invest in.

• 1:05:56Martin Lewis?

  But there are naturally no rules that stop you doing so. And some of the interest rates are around 4%, not as good as the top cash ISAs, but not far from it. So if the cash ISA limit were to be dropped, one loophole is that you could put your money in a stocks and shares ISA and hold it in cash. But there's a second, separate thing here called a money market fund, which other people look at that is sort of quasi cash. Valerie, what is a money market fund?

• 1:06:20Speaker 05

  Yeah, so a money market fund is a fund that invests in kind of cash equivalents, so short dated bonds and gilts. So it's still subject to investment risk and the value can go up and down. It's just a lower risk investment than investing a fund of equities.

• 1:06:41Martin Lewis?

  So on the back of that, thank you. On the back of that, you know, if you want to contrast a cash ISA, well, if you want to mimic a cash ISA in the stocks and shares ISA, you would leave it in the holding cash pattern and that would give you some interest, so not quite as good. Or slightly higher risk because you don't get the deposit protection that you get within a cash ISA because it's a form of savings. You could put it in money market funds to try and mimic similar returns with a relative level of safety compared to putting it into cash savings. Hopefully that answers the question. We could have done this for at least an hour more with a number of questions we've got. I'd like to thank very much at this part Valerie Wilson, Chartered Financial Planner at Johnson Carmichael Wealth, and Louise Claro, Managing Director of Circle Financial Services

• 1:07:24Martin Lewis?

  and an independent financial advisor, for all their information, debate, didactic, and hopefully help to try and get you on the investment path. Thank you both so much.

• 1:07:38Martin Lewis?

  And that is it for the week. Now, when I originally planned to do this podcast, I was going to do a whole section on how to maximise your savings interest too. But we talked so long on investment, I think I'm going to save that for next week. If you've enjoyed this week's podcast, please tell your friends that you've been listening to the Martin Lewis podcast and suggest that they do it too. Why not subscribe? That way you'll never miss it, your pockets will be pleased with you. We tend to put out a new episode every Thursday. And if you've not enjoyed it, I'm sorry. But why have you listened for this long?

• 1:08:28Speaker 08

  Martin Lewis is the founder of MoneySavingExpert.com. But of course, other consumer and price comparison websites are available. You can get in touch with Martin's podcast production team by emailing [email protected]. The offers and rates mentioned in the podcast are correct at the time of recording. However, if you are listening on demand, it's worth double checking as details can date. Remember to subscribe on BBC Sounds and leave us a review however you listen.

• 1:09:03Speaker 03

  BBC Sounds, music, radio, podcasts.

• 1:09:13Speaker 02

  Welcome to The Haunted Library. Join me, Colin Morgan, as I read Frankenstein by Mary Shelley. A story of science and ambition, loneliness and longing, and what it truly means to be human.

• 1:09:33Speaker 02

  Listen to The Haunted Library wherever you get your podcasts or find us on YouTube.