Remortgaging approvals rise amid ‘unusually high' housing market activity
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The Independent
2 days ago
- The Independent
How much risk is too much risk when it comes to your money?
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. In investing, the general rule is that the more risk you take, the greater the potential rewards. But the stock market can go down as well as up, and the idea of losing money is never pleasant. That's why so many Brits put their money into cash savings rather than the stock market. According to latest figures from the Office for National Statistics, more than 8 million of the 12.4 million Isas opened in 2022-23 were cash accounts. But to give your money the best chance of growing over the long-term, you'll need to invest it - and that means taking a degree of risk. The question is: how much? You're already taking risk - but the wrong sort It is easy to assume that leaving cash in the bank is completely safe, but this is a fallacy. As inflation pushes up the cost of living, the 'real terms' value of cash - its purchasing power - is eroded away. If inflation is 4 per cent then something that costs £100 today, will cost £104 next year, so your £100 in the bank could no longer afford it. The key is to make sure your money is growing at a faster rate than inflation so your wealth keeps pace with the rising cost of living. Research shows that investing in the stock market is the most reliable way to do this over the long-term. According to the Barclays Equity Gilt Study, which looks at data going back to 1899, investing in equities has delivered annualised returns of 6.8 per cent over the past decade after factoring in inflation, while cash has lost 1 per cent a year. Over 50 years, the stock market has delivered annual returns of 8.1 per cent compared to just 0.6 per cent for cash. Meanwhile, research by IG Group found that someone who had maxed out their Isa allowance every year since 1999 would have £275,659 today in real terms if they had put it in cash - but £410,051 if they had invested it in the FTSE 100. 'If you don't take enough risk for long-term financial goals, such as retirement, you may end up with a much smaller pot,' says Craig Rickman from the wealth manager interactive investor. Fear of losing money is a key reason so many savers are reluctant to invest. But risk is different to 'risky'. Many people associate the idea of 'financial risk' with 'gambling', but this is not necessarily the case. Risky is the chance of losing some or all of your money in the hope of big gains (think: putting it all on red at the casino). Risk, on the other hand, is the potential for ups and downs along the way, known as volatility. This is what we see on the stock market: it tends to rise over the long-term, with short-term dips along the way. As long as you don't need to access your money during a dip, you can ride this out in the hope of greater gains in the future. Younger investors in particular are often told to take more risk because they have more time to wait out those ups and downs. Claire Exley, head of financial advice and guidance at Nutmeg, says: 'What matters really is the value of your investment when you need the money, rather than the movements in value along the way.' Investors need to weigh up how much risk they need to take to generate the returns they hope to achieve, while still being able to sleep at night during those market dips. However, it is also important to pay attention to your gut instincts; some people are naturally more risk averse and won't be comfortable with any volatility, regardless of what the data shows. What to invest in Diversification is key to a smooth investment journey, especially for those just starting out. This means spreading your money across different companies, countries and assets. A broad global tracker fund, which invests in thousands of companies across the globe for a low cost, is a good place to start. To further spread your risk, you can add in different 'asset classes' (types of investment), such as bonds, gold or property. Many investing apps, such as Moneyfarm, Nutmeg, Dodl and Wealthify offer readymade portfolios that create an appropriate mix of investments, which is a good option if you don't feel confident choosing your own. Free risk questionnaires can help you determine your risk tolerance. These ask questions such as how long you plan to invest, whether you would describe yourself as a cautious person, and how you would feel about short-term fluctuations. Nutmeg, an investing app, said the average risk level for investors aged 18 to 29 is seven out of 10. This portfolio has 71 per cent in equities, 26 per cent in bonds and 3 per cent in cash - it has returned 71 per cent over the past 10 years. That compares to 22.2 per cent for Nutmeg's Level 3 portfolio and 120 per cent for Level 10. Before you start investing, experts typically advise having three to six months' of outgoings in an easy-access account in case of an emergency. Investing should be for a minimum of three to five years, so don't invest money you might need to access. Rickman says: 'Ultimately, risk appetite is a personal thing. Some people are happy to stomach heavy falls in value for the potential to make more money, and others are more cautious, favouring security and certainty over big potential returns.'
Evening Standard
2 days ago
- Evening Standard
Remortgaging approvals rise amid ‘unusually high' housing market activity
Adam French, head of news at said: 'The sharp rise in cash Isa deposits is a clear sign that rumours of Isa reform are influencing saver behaviour. With talk of slashing the annual cash Isa limit from £20,000 to £4,000, people have been rushing to use their allowances while they still can. It's a textbook example of policy speculation driving real-world financial decisions.
Metro
3 days ago
- Metro
How much you actually need to save for your first home, wedding and retirement
Whether you apportion £20 notes into physical envelopes or use a number of different savings accounts, putting your money into different 'pots' makes saving more successful. Behavioural science expert Neil Bage says this is due to a phenomenon known as 'mental accounting', whereby your mind treats money differently if you decide what it is for. 'Give your money a purpose – like a holiday fund, an emergency stash or a 'future me' fund – and you're way more likely to actually save it,' he says. Technology makes pot-based saving easier than ever. Many banks and building societies allow you to have several different savings accounts and even to rename them so that you're always clear about their purpose. But how many pots should you have? And how much do you need to put into them? Read on to find out how to apportion your savings and make every pot work hard for you. How much might you need? The average first homeowner puts down a deposit of £68,154, says UK Finance, voice for the banking and finance industry. Depending on where you live and the type of home you buy, the sum you need could be higher or lower. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video Is help at hand? While many people might turn to the Bank of Mum and Dad for help with a home deposit, the government can also provide a helping hand. The Lifetime Isa, or Lisa, allows you to put money away to spend on a first property with a bonus added from the government. As with any other Isa, the money you put in grows tax-free, and the government will add 25 per cent to what you put in. There are restrictions. You can only use the money for buying your first home, not a subsequent one, and that home can't be worth more than £450,000. You're limited to putting £4,000 a year into your Lisa, with the government adding a maximum bonus of £1,000. If you don't use the money for a first home, you can either use it for retirement by taking it out over the age of 60, or you can take it out but pay a penalty which works out higher than the government bonus. You can save a bigger sum of course, in a fixed-term savings account, and the longer you are prepared to leave it, the better the interest rate tends to be. It may be sensible to lock away some money in a fixed rate account in return for better interest rates over time. Automate monthly payments into your house deposit pot, to ensure you meet your targets. How much might you need? Most of us need to save into a pension for our retirement. According to the Pension And Lifetime Savings Association (PLSA) we'll need a pot of between £330,000 and £490,000 to have a moderate retirement. Is help at hand? Those figures sound daunting but fortunately, unless you are self-employed, your employer will also pay into your pension, helping it to grow, while the taxman will work with you, too, by adding back the income tax you've paid on your pension contributions. The earlier you start, the easier it will be. Having a pension scheme will ensure you get tax back and with employer contributions you'll be able to benefit from compound growth over time. How much might you need? The cost of a week in the sun has been rising faster than inflation, up to £1,166 for a week in Turkey all-inclusive or £914 for a week in Spain, according to Travel Supermarket. Putting away money each month towards a holiday like this makes the bill less painful later. For a family of four, putting £333.33 a month into a savings pot would give you £4,000 after a year, while a single person might get away with £83 a month for a £1,000 holiday. Is help at hand? Regular savings accounts might give your holiday cash a boost. These offer a high interest rate for your savings in return for you putting away a certain amount every month. You are rewarded for consistency but can only put away a certain lowish amount – perfect for holiday spends as the accounts usually pay the interest after a year. As well as using a Regular Saver account to benefit from interest, make sure you automate your payments, so you don't forget one and you've plenty in your holiday fund when you come to book. How much might you need? We spend more than £774 a year each on Christmas, research from Yorkshire Building Society suggests. But many of us go into debt to pay for it and are still paying it off when the next festive season rolls around. Saving in advance can take the sting out of it. You'd need to put £64.50 a month into a Christmas pot to cover this amount over a year. Is help at hand? Some financial institutions offer specific Christmas savings accounts, such as Yorkshire Building Society's Christmas e-saver, which allows you to put away £150 a month and get five per cent interest. Unlike Christmas savings schemes offered by supermarkets and other organisations, with a bank or building society your cash is protected. As well as saving into your pot regularly, you could declutter unwanted gifts from last year on Vinted, eBay or Facebook Marketplace and add what you make to it. How much might you need? More Trending Figures from wedding planning website National Wedding Survey suggest the average cost of the Big Day is now £23,250, meaning a couple who want to pay outright must put away £1,162.50 a month over an average 20-month engagement. Is help at hand? The Hitched survey suggests that parents shell out £14,647 per wedding on average. But not everyone wants to turn to the Bank of Mum and Dad. An alternative is to cut costs by having a smaller do, holding your wedding on a weekday or choosing cheaper catering options. Regular savings accounts may have limits that are too small for monthly wedding savings but whatever account you choose to save into, make sure you keep an eye on the interest rate and move your money if the rate drops. Consider an account with a fixed rate to guard against sudden falls in the Bank of England interest rate, and if you can use your Isa allowance – currently £20,000 a year each – this will help ensure the taxman takes less of your wedding saving View More » MORE: I have to hide washing-up liquid in my room because of my stingy flatmate MORE: Powder rooms with personality – 7 bathroom renovations to inspire your next DIY MORE: Readers discuss Corbyn's 'own goal', Doctor Who and gorilla costumes Your free newsletter guide to the best London has on offer, from drinks deals to restaurant reviews.
