May 29, 2025 • 17 mins
No matter how much you have to invest, setting good and solid foundations is vital.
In this episode, our host Iona Bain is joined by friend of the show and financial adviser Rotimi Merriman Johnson, aka Mr. MoneyJar, to demystify the world of investing.
From choosing the investment platform to understanding index funds, stocks and tax-efficient accounts like ISAs and SIPPs, Rotimi shares clear, practical advice without the jargon. They also discuss the psychology of investing, the importance of diversification, and how to stay focused on long-term growth, especially when the markets get bumpy.
Get ready to be empowered to take those first steps towards building a future you’ll thank yourself for.
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Iona and her guests share their own personal thoughts and opinions in this podcast. These might be different from Legal & General’s take on things. They give financial guidance for a UK audience that’s relevant at the time of recording. It’s general best practice, not the kind of personalised advice you’d get from a financial adviser.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Iona (00:02):
Hello, I'm Iona Bain, and welcome to A Little Bit
Richer, brought to you by L& G. Now, with so
many different options available, it can be tricky to know
where to start when building your investment portfolio, but no
matter how much you have to invest, it's important to
get the basics right, so you can build good habits
and grow your money. So today, we're looking at how
(00:22):
you might start investing beyond your pension savings, so you
can build a portfolio your future self will thank you
for. And we couldn't think of anyone better to join
us today than Mr. MoneyJar himself, Rotimi Merriman- Johnson. He's
a financial advisor and award- winning content creator who's been
featured on the BBC, the Financial Times, ITV News, and
(00:44):
Sky News. Rotimi is an ambassador of the UK charity
National Numeracy, and he hosts his own financial podcast, The
Mr. MoneyJar Show. Welcome, Rotimi.
Rotimi (00:54):
Thanks very much for having me, Iona.
Iona (00:56):
Before we start investing, should we have a cushion? And
if so, how much should we have in easily accessible savings?
Rotimi (01:06):
Yeah. So the standard advice around emergency funds is that
you should have three to six months' worth of living
expenses tucked away. We've had a lot of inflation in
the last few years. The cost of living is quite
high. Six months represents quite a lot of money for
people. So when I speak to people, I say, " Try
and have, as a starting point, one month's worth of
(01:28):
expenses tucked away." And I try not to give a
fixed sum, because that depends on the time and the
place. But just imagine, if you had one month's worth
of expenses tucked away, just the psychological ease that you
would feel and the financial resilience you would have. One
month's of living expenses, put it in an easy access
savings account, and then anything over and above that you
(01:51):
can begin to invest, if you so wish.
Iona (01:54):
And why should people have that money in easily accessible
savings? Why couldn't people just rely on the money that
they've invested in the stock market and pull that out
at any time?
Rotimi (02:05):
Right. So it's because, as we know with investing, the
value of investments can rise as well as fall. And
if you don't have that emergency fund set aside and
all of your money is invested, and the stock market
takes a tumble, as it has done in recent times,
then you might have to sell your investments at a
(02:26):
loss to access your money. So that's why we keep
a portion of our money in emergency savings, and then
we invest the surplus.
Iona (02:36):
Mm- hmm. So it's not about choosing whether to save
or invest. In a sense, we've all got to be
both team saving and team investing.
Rotimi (02:44):
Yeah. The saving bit is for short- term future you,
and the investing bit is for long- term future you,
like years and years into the future.
Iona (02:51):
So let's assume therefore that somebody has got that foundation
in place and they're looking to start investing. Where should
they begin?
Rotimi (03:00):
So there's three simple steps when it comes to investing.
You need to pick an investing platform, sometimes called a
broker. You need to pick your investment account or accounts.
And then you need to decide what the money is
going to be invested in. So that's the basics of
it. Now, when it comes to signing up to investment
(03:21):
platform, this is a very, very similar process to opening
a bank account online. You then need to nominate a
bank account that you want to then use to add
money to that platform. And you can typically add money
in a couple of ways, either through lump sums or
through monthly savings. And the lump sum amounts tend to
be slightly higher than the monthly savings amounts. Some platforms
(03:44):
will let you do monthly savings from as little as £ 25 a month, for example.
Iona (03:48):
That sounds like a really achievable, realistic way to start
investing. And also, can there be advantages in drip feeding that
money into the stock market on a regular basis?
Rotimi (04:00):
Yes. So there is a temptation to do what's called
time the market. Try and buy at the right time, try and sell at
the right time. If you instead just decide to invest
what you can afford every single month for the long
term, then this removes the temptation to time the market,
it reduces some of the anxiety around prices going up
(04:20):
and down, and we're doing it so that we can
build our wealth at a point in the future.
Iona (04:25):
You've got to take a step back and just trust
in the process.
Rotimi (04:28):
Yeah.
Iona (04:28):
Yeah. So on the one hand, you can buy shares in individual
companies, as you were saying before, and that's ultimately what
we are doing when we're investing. But we don't have
to do that ourselves necessarily, and therefore deal with all
those issues that can come along with that. We can
also invest in funds. Just explain what the difference is
(04:49):
between investing in companies on an individual basis versus investing
in funds.
Rotimi (04:54):
Yeah. So you've signed up to your platform, and then
you'll need to open an investing account within that platform.
So investing platforms will typically offer a general investment account.
With this, you can put in as much money as
you like, and then you can invest that money. So
there's no annual limit, but no tax protection. Then you've
(05:14):
got stocks and shares ISAs, one of the four ISA
types. You can put in up to £ 20,000 per tax
year into a stocks and shares ISA, and of the
money that you put in, any gains that you get
on your investments or any dividends that you receive are
completely tax- free. And this becomes especially powerful once you
begin to really tap into compounding and get to those
larger investment sizes. SIPPs are another type of investment account.
Iona (05:37):
What does that stand for?
Rotimi (05:39):
SIPP stands for self- invested personal pension. And not a lot of people
realize this, but a workplace pension is a type of
private pension, but you can open a pension of your
own, and there's no actual limit to the number of
pension accounts you can open and contribute to in a
tax year. Self- invested personal pensions have their own annual
limit of £ 60,000 per tax year, and again, that money is
(06:01):
sheltered from tax, and you get what's called tax relief
on your contributions, which is where the government adds in
extra money.
Iona (06:08):
Mm- hmm. And it also depends on your goal. If you're
wanting to enhance your retirement income, SIPP could be worth considering.
Rotimi (06:15):
Or if you're self- employed. Yeah.
Iona (06:16):
Indeed, because you don't have your workplace pension.
Rotimi (06:18):
Exactly.
Iona (06:19):
Absolutely. And then when it comes to those differences between
investing in funds and investing in individual shares, explain what
the pros and cons are respectively.
Rotimi (06:30):
Yes, yes. So you can invest in stocks, which is when
you purchase ownership in a company, so shares in Google
for example. The thing with purchasing individual stocks is your
investment performance is tied to just that one company, and
it's a more active way of investing. So if you
(06:50):
pick the right stock, then you can do really well
off the back of it potentially, but it also means
that if the company doesn't do so well, your investment
can go to zero. So what some people do is
they invest in what are called funds, which is where
you give your money to an investment firm who's buying
shares on their end, but they've basically selected a group
(07:14):
of shares which they think are either going to outperform
the market or target a particular sector, like tech or
clean energy. And the performance of your investment will be the
average of how all the companies in that fund does.
Then when it comes to funds, there are actively managed
funds, which is where a selection process has gone on,
(07:36):
and then there are index funds or tracker funds, which
just try to replicate what the market does. And index
or tracker funds are particularly popular with people because they're
very cheap, and they're not actively managed, and you can
buy indexes that track the UK stock market, the US
stock market, or even the global stock market.
Iona (07:55):
I mean, buying and selling shares has become a lot
more accessible and a lot more popular in recent times,
which on the one hand is something I assume that
you'd be quite encouraged to see, but there can be
downsides to that, can't there? Because you can get involved
and jump in at the deep end but not necessarily know
that much about what you're doing. What would your advice
(08:15):
be for anyone who is tempted to get out there
and start buying and selling shares, and might be quite gung-
ho about it, and maybe need to take a step
back and assess what the risks are?
Rotimi (08:26):
Yeah. If you want to invest, take an amount of
money that you don't need, invest it, and just use
that to see what happens. Use it to get used to
the buying and selling. And this is why it's good
that a lot of investing platforms have quite low minimums
when it comes to putting money into the platform. You
can invest it, and it's almost like you're learning the buying
(08:47):
and selling process. You're getting used to seeing your money
go up and down in value, and you're building your
confidence whilst not risking it all.
Iona (08:56):
So if in doubt, start small, and then work up from-
Rotimi (09:00):
And then build. Yeah.
Iona (09:01):
Yeah. Absolutely. What's a good rule of thumb for diversifying
your investments, and why does diversification matter so much when
it comes to investing?
Rotimi (09:11):
So diversification in simple terms means not putting all your
eggs in one basket. And the reason why we do
this is because different companies will go through different cycles
and will perform differently at different times, and rather than
have a scenario where you're just invested into one company
(09:31):
and you're hoping that that company does well, you build
what's called a portfolio of companies. You can do this
yourself, or you can use a fund. And the performance
of your investments will depend on how a selection of
companies does. So it helps with your investment performance, and
again, it helps from a psychological perspective of, you're not
(09:52):
relying on just one company to deliver your returns for
you. If you're creating a portfolio for yourself, as some
people do, it will mean that you'll need to understand
each individual company and why you're putting them into your
portfolio. If you're a beginner investor or you're not interested
in picking stocks, you can just buy units in a
fund, and that's another way of diversifying. So to put
(10:16):
it in context, if you were using an index fund
that tracked the UK stock market, the FTSE 100, you would have
100 companies in that fund. So for your money to
go to zero, it would require 100 companies to go
to zero, which I think if that's happened, we have
bigger problems to worry about.
Iona (10:33):
Yes. Yes.
Rotimi (10:34):
If you're investing in the US, you can buy an
index which tracks the biggest 500 companies in the US.
Again, that's diversification there. And then if you invest in
a global fund, which is what I personally do, then
that could contain hundreds or even thousands of companies from
all over the world. And in a global fund, the
weighting of the different countries will follow the size of
(10:57):
the global stock market.
Iona (10:59):
We've spoken about how some people might be quite happy
to jump in and get started, but there could be
lots of people for whom the prospect of losing money
is a very scary one. So how do we get
over that fear?
Rotimi (11:11):
It's a very legitimate fear. And look, we're not taught
about this stuff in school. You may or may not
have someone at home who can teach you this stuff.
But what we are taught to do is to buy
things, which shops to go to. You know the right
prices to buy things at. But when it comes to
investing, or perhaps even saving, we don't have that same
knowledge. And that's where I think the fear comes from,
I think comes from a lack of experience and of
(11:34):
expectation of what's going to happen.
Iona (11:37):
And also because we have to delay gratification. We're saving
and investing, we have to wait to get those results.
Rotimi (11:42):
Yeah, exactly. But there's a couple things I would say
to people. If you are one of the 30 million (inaudible)
employees in the UK, you're investing already. You're investing
into your workplace pension. That money is not held in
cash, that money is being invested. You're paying into it
month in, month out. And as a result, pension wealth
(12:02):
is the biggest store of wealth in the UK, and
it's just from everyone working, paying into their pensions every
month. So you're already doing it, albeit behind the scenes.
When it comes to investing your money in, say, a
stocks and shares ISA for example, you can use a
very similar principle of taking what you can afford, investing
regularly, and doing it for the long term. Now, there's
(12:24):
no such thing as a 100% risk- free investment, but we
must remember the distinction between the value of our investments
going down and losing money. If you invest your money,
the value will go up and down, but you do
not lose or gain money until you sell. Again, that's
why we do it for the long term. If we
(12:46):
do it for the long term and we don't need to
sell our investments, we can wait for the market to
recover, essentially. And if you look at the stock market
chart for the FTSE 100, the S&P 500, for example, you'll see that it trends
upwards, but it's not in a straight line.
Iona (13:03):
What would your advice be to anyone who is seeing
all that turmoil out there and is thinking, " Actually, I'm
not sure if this is the right time to be invested"?
Rotimi (13:11):
Yeah. Isn't it interesting how someone can say something, and
then the value of a company will drop, even though
the on- the- ground reality of that company has not changed?
Iona (13:23):
Yeah.
Rotimi (13:23):
So when it comes to how we value companies, there's
almost the book value of that company, but then there's
this added value on top based upon what people think
is going to happen. They'll then sell those stocks, and
then that will cause the value to fall. Those changes
in valuation happen in the short term all the time,
(13:45):
all day, every day. They're playing one game, but you're
playing a different game, which is to ignore the noise
and to invest for long term. So this is why I say
the volatility is going to happen, but if you can stay the
course, then it's not something that you need to worry about.
Iona (14:02):
What about these options that people might see when they
start their investing journey that seem a little bit more
exotic, like crypto, commodities, gold, forex trading? What would your
advice be around those options?
Rotimi (14:18):
There's a very important investing principle, which was shared by
Warren Buffett, held by many to be the best investor
of all time. And his principle is to invest in
what you understand. That's what I would say to people. Do
you understand what you're investing in? Do you understand, if
the price has gone down or gone up, why it's
gone down or gone up? Do you understand the trends,
(14:40):
the cycles? If you don't, then that's when the anxiety
and the worry sets in. If you've seen something online,
you've gone, " I'm going to invest in that because I've
someone talking about it," you don't know why they've bought
it, or if they've even bought it, you copy them,
and then it's now gone down 30%, and you're worried.
So I would just say, stick to what you understand,
(15:03):
and continually learn and build upon your knowledge.
Iona (15:05):
And also perhaps be wary of anything that looks like
a shortcut or a get rich quick scheme, because there
are no shortcuts when it comes to investing. It's long-
term, by its very nature.
Rotimi (15:15):
Yeah. It's a long- term thing, one. Two, people who are
making money and investing are not on the internet talking
about their strategies. Trust me. They're just quietly making money
from it. They're not going to come online to tell
you how to 10x your money in a month.
Iona (15:29):
Yeah, because they're already doing fine.
Rotimi (15:31):
Yeah.
Iona (15:32):
Are there any investing principles that we ought to really
keep in mind as we start this journey, and try
to stick with investing for the long term?
Rotimi (15:42):
Diversification, trying not to time the market, so trying not
to get in and get out, and investing in what
you understand. I think if you stick to these four
principles, the quality of your decision- making is going to
go up.
Iona (15:55):
And if there are three things that you would want
to serve as the starting point for people as they
go about this, what would those three things be?
Rotimi (16:05):
Investing's for everyone. It's never been easier or more accessible
for people, so I wouldn't want people to be scared
of it, if you use the investing principles we've spoken
about. You don't need to have loads and loads of
money to invest. In fact, you can start with small
sums, and because of compounding, the earlier you start, the
(16:25):
longer your money has to grow. And it doesn't need
to be super complicated. You get great results by investing
consistently for the long term in a diversified way.
Iona (16:38):
So in a sense, once you've actually just taken that
decision, you've done the hard bit, in a way.
Rotimi (16:43):
Yeah.
Iona (16:43):
You then just have to wait to see-
Rotimi (16:45):
The hard bit is leaving it alone. Yeah.
Iona (16:47):
Yes. That is all fantastic advice. Thank you so much, Rotimi.
Rotimi (16:51):
Thank you for having me.
Iona (16:51):
Well, Rotimi, I think we're feeling a lot more empowered
now to go and start that future fund, so thank
you very much. Next time the consumer editor at The
Financial Times, Claer Barrett, will be here to talk through
living with debt and managing it. This podcast is brought
to you by L& G. You can keep up with
the show on YouTube, TikTok, and Instagram @ legalandgeneral, and I would
(17:14):
love it if you could follow the podcast, leave us
a review, and help others get a little bit richer
too. Thanks for listening. Until next time, see you soon.
Hello, I'm Iona Bain, and welcome to A Little Bit
Richer, brought to you by L& G. Now, with so
many different options available, it can be tricky to know
where to start when building your investment portfolio, but no
matter how much you have to invest, it's important to
get the basics right, so you can build good habits
and grow your money. So today, we're looking at how
(00:22):
you might start investing beyond your pension savings, so you
can build a portfolio your future self will thank you
for. And we couldn't think of anyone better to join
us today than Mr. MoneyJar himself, Rotimi Merriman- Johnson. He's
a financial advisor and award- winning content creator who's been
featured on the BBC, the Financial Times, ITV News, and
(00:44):
Sky News. Rotimi is an ambassador of the UK charity
National Numeracy, and he hosts his own financial podcast, The
Mr. MoneyJar Show. Welcome, Rotimi.
Rotimi (00:54):
Thanks very much for having me, Iona.
Iona (00:56):
Before we start investing, should we have a cushion? And
if so, how much should we have in easily accessible savings?
Rotimi (01:06):
Yeah. So the standard advice around emergency funds is that
you should have three to six months' worth of living
expenses tucked away. We've had a lot of inflation in
the last few years. The cost of living is quite
high. Six months represents quite a lot of money for
people. So when I speak to people, I say, " Try
and have, as a starting point, one month's worth of
(01:28):
expenses tucked away." And I try not to give a
fixed sum, because that depends on the time and the
place. But just imagine, if you had one month's worth
of expenses tucked away, just the psychological ease that you
would feel and the financial resilience you would have. One
month's of living expenses, put it in an easy access
savings account, and then anything over and above that you
(01:51):
can begin to invest, if you so wish.
Iona (01:54):
And why should people have that money in easily accessible
savings? Why couldn't people just rely on the money that
they've invested in the stock market and pull that out
at any time?
Rotimi (02:05):
Right. So it's because, as we know with investing, the
value of investments can rise as well as fall. And
if you don't have that emergency fund set aside and
all of your money is invested, and the stock market
takes a tumble, as it has done in recent times,
then you might have to sell your investments at a
(02:26):
loss to access your money. So that's why we keep
a portion of our money in emergency savings, and then
we invest the surplus.
Iona (02:36):
Mm- hmm. So it's not about choosing whether to save
or invest. In a sense, we've all got to be
both team saving and team investing.
Rotimi (02:44):
Yeah. The saving bit is for short- term future you,
and the investing bit is for long- term future you,
like years and years into the future.
Iona (02:51):
So let's assume therefore that somebody has got that foundation
in place and they're looking to start investing. Where should
they begin?
Rotimi (03:00):
So there's three simple steps when it comes to investing.
You need to pick an investing platform, sometimes called a
broker. You need to pick your investment account or accounts.
And then you need to decide what the money is
going to be invested in. So that's the basics of
it. Now, when it comes to signing up to investment
(03:21):
platform, this is a very, very similar process to opening
a bank account online. You then need to nominate a
bank account that you want to then use to add
money to that platform. And you can typically add money
in a couple of ways, either through lump sums or
through monthly savings. And the lump sum amounts tend to
be slightly higher than the monthly savings amounts. Some platforms
(03:44):
will let you do monthly savings from as little as £ 25 a month, for example.
Iona (03:48):
That sounds like a really achievable, realistic way to start
investing. And also, can there be advantages in drip feeding that
money into the stock market on a regular basis?
Rotimi (04:00):
Yes. So there is a temptation to do what's called
time the market. Try and buy at the right time, try and sell at
the right time. If you instead just decide to invest
what you can afford every single month for the long
term, then this removes the temptation to time the market,
it reduces some of the anxiety around prices going up
(04:20):
and down, and we're doing it so that we can
build our wealth at a point in the future.
Iona (04:25):
You've got to take a step back and just trust
in the process.
Rotimi (04:28):
Yeah.
Iona (04:28):
Yeah. So on the one hand, you can buy shares in individual
companies, as you were saying before, and that's ultimately what
we are doing when we're investing. But we don't have
to do that ourselves necessarily, and therefore deal with all
those issues that can come along with that. We can
also invest in funds. Just explain what the difference is
(04:49):
between investing in companies on an individual basis versus investing
in funds.
Rotimi (04:54):
Yeah. So you've signed up to your platform, and then
you'll need to open an investing account within that platform.
So investing platforms will typically offer a general investment account.
With this, you can put in as much money as
you like, and then you can invest that money. So
there's no annual limit, but no tax protection. Then you've
(05:14):
got stocks and shares ISAs, one of the four ISA
types. You can put in up to £ 20,000 per tax
year into a stocks and shares ISA, and of the
money that you put in, any gains that you get
on your investments or any dividends that you receive are
completely tax- free. And this becomes especially powerful once you
begin to really tap into compounding and get to those
larger investment sizes. SIPPs are another type of investment account.
Iona (05:37):
What does that stand for?
Rotimi (05:39):
SIPP stands for self- invested personal pension. And not a lot of people
realize this, but a workplace pension is a type of
private pension, but you can open a pension of your
own, and there's no actual limit to the number of
pension accounts you can open and contribute to in a
tax year. Self- invested personal pensions have their own annual
limit of £ 60,000 per tax year, and again, that money is
(06:01):
sheltered from tax, and you get what's called tax relief
on your contributions, which is where the government adds in
extra money.
Iona (06:08):
Mm- hmm. And it also depends on your goal. If you're
wanting to enhance your retirement income, SIPP could be worth considering.
Rotimi (06:15):
Or if you're self- employed. Yeah.
Iona (06:16):
Indeed, because you don't have your workplace pension.
Rotimi (06:18):
Exactly.
Iona (06:19):
Absolutely. And then when it comes to those differences between
investing in funds and investing in individual shares, explain what
the pros and cons are respectively.
Rotimi (06:30):
Yes, yes. So you can invest in stocks, which is when
you purchase ownership in a company, so shares in Google
for example. The thing with purchasing individual stocks is your
investment performance is tied to just that one company, and
it's a more active way of investing. So if you
(06:50):
pick the right stock, then you can do really well
off the back of it potentially, but it also means
that if the company doesn't do so well, your investment
can go to zero. So what some people do is
they invest in what are called funds, which is where
you give your money to an investment firm who's buying
shares on their end, but they've basically selected a group
(07:14):
of shares which they think are either going to outperform
the market or target a particular sector, like tech or
clean energy. And the performance of your investment will be the
average of how all the companies in that fund does.
Then when it comes to funds, there are actively managed
funds, which is where a selection process has gone on,
(07:36):
and then there are index funds or tracker funds, which
just try to replicate what the market does. And index
or tracker funds are particularly popular with people because they're
very cheap, and they're not actively managed, and you can
buy indexes that track the UK stock market, the US
stock market, or even the global stock market.
Iona (07:55):
I mean, buying and selling shares has become a lot
more accessible and a lot more popular in recent times,
which on the one hand is something I assume that
you'd be quite encouraged to see, but there can be
downsides to that, can't there? Because you can get involved
and jump in at the deep end but not necessarily know
that much about what you're doing. What would your advice
(08:15):
be for anyone who is tempted to get out there
and start buying and selling shares, and might be quite gung-
ho about it, and maybe need to take a step
back and assess what the risks are?
Rotimi (08:26):
Yeah. If you want to invest, take an amount of
money that you don't need, invest it, and just use
that to see what happens. Use it to get used to
the buying and selling. And this is why it's good
that a lot of investing platforms have quite low minimums
when it comes to putting money into the platform. You
can invest it, and it's almost like you're learning the buying
(08:47):
and selling process. You're getting used to seeing your money
go up and down in value, and you're building your
confidence whilst not risking it all.
Iona (08:56):
So if in doubt, start small, and then work up from-
Rotimi (09:00):
And then build. Yeah.
Iona (09:01):
Yeah. Absolutely. What's a good rule of thumb for diversifying
your investments, and why does diversification matter so much when
it comes to investing?
Rotimi (09:11):
So diversification in simple terms means not putting all your
eggs in one basket. And the reason why we do
this is because different companies will go through different cycles
and will perform differently at different times, and rather than
have a scenario where you're just invested into one company
(09:31):
and you're hoping that that company does well, you build
what's called a portfolio of companies. You can do this
yourself, or you can use a fund. And the performance
of your investments will depend on how a selection of
companies does. So it helps with your investment performance, and
again, it helps from a psychological perspective of, you're not
(09:52):
relying on just one company to deliver your returns for
you. If you're creating a portfolio for yourself, as some
people do, it will mean that you'll need to understand
each individual company and why you're putting them into your
portfolio. If you're a beginner investor or you're not interested
in picking stocks, you can just buy units in a
fund, and that's another way of diversifying. So to put
(10:16):
it in context, if you were using an index fund
that tracked the UK stock market, the FTSE 100, you would have
100 companies in that fund. So for your money to
go to zero, it would require 100 companies to go
to zero, which I think if that's happened, we have
bigger problems to worry about.
Iona (10:33):
Yes. Yes.
Rotimi (10:34):
If you're investing in the US, you can buy an
index which tracks the biggest 500 companies in the US.
Again, that's diversification there. And then if you invest in
a global fund, which is what I personally do, then
that could contain hundreds or even thousands of companies from
all over the world. And in a global fund, the
weighting of the different countries will follow the size of
(10:57):
the global stock market.
Iona (10:59):
We've spoken about how some people might be quite happy
to jump in and get started, but there could be
lots of people for whom the prospect of losing money
is a very scary one. So how do we get
over that fear?
Rotimi (11:11):
It's a very legitimate fear. And look, we're not taught
about this stuff in school. You may or may not
have someone at home who can teach you this stuff.
But what we are taught to do is to buy
things, which shops to go to. You know the right
prices to buy things at. But when it comes to
investing, or perhaps even saving, we don't have that same
knowledge. And that's where I think the fear comes from,
I think comes from a lack of experience and of
(11:34):
expectation of what's going to happen.
Iona (11:37):
And also because we have to delay gratification. We're saving
and investing, we have to wait to get those results.
Rotimi (11:42):
Yeah, exactly. But there's a couple things I would say
to people. If you are one of the 30 million (inaudible)
employees in the UK, you're investing already. You're investing
into your workplace pension. That money is not held in
cash, that money is being invested. You're paying into it
month in, month out. And as a result, pension wealth
(12:02):
is the biggest store of wealth in the UK, and
it's just from everyone working, paying into their pensions every
month. So you're already doing it, albeit behind the scenes.
When it comes to investing your money in, say, a
stocks and shares ISA for example, you can use a
very similar principle of taking what you can afford, investing
regularly, and doing it for the long term. Now, there's
(12:24):
no such thing as a 100% risk- free investment, but we
must remember the distinction between the value of our investments
going down and losing money. If you invest your money,
the value will go up and down, but you do
not lose or gain money until you sell. Again, that's
why we do it for the long term. If we
(12:46):
do it for the long term and we don't need to
sell our investments, we can wait for the market to
recover, essentially. And if you look at the stock market
chart for the FTSE 100, the S&P 500, for example, you'll see that it trends
upwards, but it's not in a straight line.
Iona (13:03):
What would your advice be to anyone who is seeing
all that turmoil out there and is thinking, " Actually, I'm
not sure if this is the right time to be invested"?
Rotimi (13:11):
Yeah. Isn't it interesting how someone can say something, and
then the value of a company will drop, even though
the on- the- ground reality of that company has not changed?
Iona (13:23):
Yeah.
Rotimi (13:23):
So when it comes to how we value companies, there's
almost the book value of that company, but then there's
this added value on top based upon what people think
is going to happen. They'll then sell those stocks, and
then that will cause the value to fall. Those changes
in valuation happen in the short term all the time,
(13:45):
all day, every day. They're playing one game, but you're
playing a different game, which is to ignore the noise
and to invest for long term. So this is why I say
the volatility is going to happen, but if you can stay the
course, then it's not something that you need to worry about.
Iona (14:02):
What about these options that people might see when they
start their investing journey that seem a little bit more
exotic, like crypto, commodities, gold, forex trading? What would your
advice be around those options?
Rotimi (14:18):
There's a very important investing principle, which was shared by
Warren Buffett, held by many to be the best investor
of all time. And his principle is to invest in
what you understand. That's what I would say to people. Do
you understand what you're investing in? Do you understand, if
the price has gone down or gone up, why it's
gone down or gone up? Do you understand the trends,
(14:40):
the cycles? If you don't, then that's when the anxiety
and the worry sets in. If you've seen something online,
you've gone, " I'm going to invest in that because I've
someone talking about it," you don't know why they've bought
it, or if they've even bought it, you copy them,
and then it's now gone down 30%, and you're worried.
So I would just say, stick to what you understand,
(15:03):
and continually learn and build upon your knowledge.
Iona (15:05):
And also perhaps be wary of anything that looks like
a shortcut or a get rich quick scheme, because there
are no shortcuts when it comes to investing. It's long-
term, by its very nature.
Rotimi (15:15):
Yeah. It's a long- term thing, one. Two, people who are
making money and investing are not on the internet talking
about their strategies. Trust me. They're just quietly making money
from it. They're not going to come online to tell
you how to 10x your money in a month.
Iona (15:29):
Yeah, because they're already doing fine.
Rotimi (15:31):
Yeah.
Iona (15:32):
Are there any investing principles that we ought to really
keep in mind as we start this journey, and try
to stick with investing for the long term?
Rotimi (15:42):
Diversification, trying not to time the market, so trying not
to get in and get out, and investing in what
you understand. I think if you stick to these four
principles, the quality of your decision- making is going to
go up.
Iona (15:55):
And if there are three things that you would want
to serve as the starting point for people as they
go about this, what would those three things be?
Rotimi (16:05):
Investing's for everyone. It's never been easier or more accessible
for people, so I wouldn't want people to be scared
of it, if you use the investing principles we've spoken
about. You don't need to have loads and loads of
money to invest. In fact, you can start with small
sums, and because of compounding, the earlier you start, the
(16:25):
longer your money has to grow. And it doesn't need
to be super complicated. You get great results by investing
consistently for the long term in a diversified way.
Iona (16:38):
So in a sense, once you've actually just taken that
decision, you've done the hard bit, in a way.
Rotimi (16:43):
Yeah.
Iona (16:43):
You then just have to wait to see-
Rotimi (16:45):
The hard bit is leaving it alone. Yeah.
Iona (16:47):
Yes. That is all fantastic advice. Thank you so much, Rotimi.
Rotimi (16:51):
Thank you for having me.
Iona (16:51):
Well, Rotimi, I think we're feeling a lot more empowered
now to go and start that future fund, so thank
you very much. Next time the consumer editor at The
Financial Times, Claer Barrett, will be here to talk through
living with debt and managing it. This podcast is brought
to you by L& G. You can keep up with
the show on YouTube, TikTok, and Instagram @ legalandgeneral, and I would
(17:14):
love it if you could follow the podcast, leave us
a review, and help others get a little bit richer
too. Thanks for listening. Until next time, see you soon.
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