Talk to me about investing please!

[Enigmasaurus]

I’m clueless

Some context:
We’re mid 30s, 4 small children. Own our own home (mortgaged). Have good professional incomes, though I am currently part time. Household income puts us in the top 5%. We have good public sector pensions.

I read a lot about needing to ‘invest’ and am not sure what that means / how to go about it..

I grew up in a working class family with little money. ‘Saving’ was impressed upon us - as cash in the bank. The only time ‘Investing’ was spoken about, it was in relation to property.
We are fortunate enough to have some money in savings for us and the children, (with a view to increasing over time), and own 2 additional properties.

I’ve been looking at our finances, and feel we should do more with our disposable income. Currently thinking of splitting this 3 ways (savings, mortgage overpayment and ‘investing’). But I have no idea how to go about investing! Considering stocks/shares in a whole market fund (I think...) but where? And how? And how much?? what do other people do?

I appreciate that we are in an extremely fortunate position. Any help / advice / pointers would be very welcome

Please don’t apologise Gobbo! It’s great to get other views and opinions, and having someone else going through the process asking questions that I probably haven’t even thought of
Hopefully it’ll be useful for more than just me!

There are a lot of good sources of information available about investment vehicles:

www.vanguardinvestor.co.uk/investing-explained/investment-fund-types

This video is pretty good too.

www.fidelity.com/learning-center/investment-products/etf/what-to-consider

But they are all just wrappers for individual investments - cling film or wax paper if you will. What matters is what's inside and what the ongoing costs and charges will be.

Gobbo you can select individual ETF's for your DC or do the Life Strategy funds or a combination. The key is how much risk you can tolerate and when you anticipate needing the money. The sooner you'll need the money the less risky the investment should be. So if your DC's are teenagers and you'll need the money for university costs, you need very low risk investments. If they're toddlers and you're investing to give them a house deposit in 25 years you can take on more risk and get a higher return. You will also need to move to lower risk investments as the time of need gets closer. This is called portfolio re-balancing. I'm doing it now as I get closer to retirement. I'm selling some of my stock index funds and using the money to buy bond index funds. If you tell me how old your DC are and what your goal is I can be more helpful.

You can combine the two also. You could put 80% of the money into a moderate risk LS fund and 20% into an index fund or ETF that tracks the US S&P 500 stock index. Simplicity is always a good idea and I think in that sense the LS funds may be a bit better for a new investor.

Do not try to time the market as to when you get in. It's a fool's errand. Just get in and keep topping it up a bit every month. When I first started the Dow Jones average in the US was around 2000. I recall being told at the time that stocks were so high that it was a terrible time to invest and that I should wait. Fortunately I ignored that advice. The DJ is now around 25,000.

EFT's and index funds have a unit price that reflects the market value of the underlying securities, so if the market goes down the same amount of cash will buy more shares. If you invest a set amount every month, sometimes you'll get a bit more, sometimes a bit less. Think of a down market period as a time to buy on sale.

HTH and that I haven't forgotten any of your questions.

Don't invest in stuff you don't understand.
It's how people get caught with endowment mortgages etc.

I don’t intend to Teen
The whole point is that I’m trying to understand. Before investing (hopefully)!

@MissConductUS

Thank you so much for detailed helpful response.

Op from my reading and podcasts listening the biggest enemy to investing is... Inertia!

@Gobbolinocat - You're quite welcome, I'm sure.

You're correct about inertia. And it really needs to be effortless on your part. One advantage of the mutual funds (like the index or Vanguard Life Strategy funds) is that it's easy to setup a recurring, automatic transfer from your checking account every month. Then there's nothing to remember and it's just like another expense that you expect, like the electric. Because ETF's trade like stocks you'd have to log into your account and submit a buy order, which is a much bigger faff.

Good luck and feel free to PM me (anyone) if you've questions you don't want to post.

I ran across these two articles on the Kiplinger Magazine website and thought them quite good and relevant to this discussion. The first gives some interesting history on index funds and how the market for them has evolved and become more competitive:

The Power of Index Funds

This one is about the history of Vanguard and Jack Bogle's fan club, the Bogelheads:

Investing Lessons From Vanguard's Bogleheads

Kiplinger is a good resource, especially for beginning investors, and you don't have to be a subscriber to read the articles on the website. It is however written for an American audience.