Completely overwhelmed but need to act - help please!

[kualitate]

I have always held my money in cash ISAs and have been very cautious as I am planning to buy a house in the next 6 months. However, I'm realising that I ought to have been investing years ago alongside saving hard. This is my now my next big financial goal so I can secure some future stability and make my money work harder for me. Also, my pension situation is woeful after many years of freelancing/fixed term contracts so I need to address this through investing.

I have started to read up on investing but am completely overwhelmed by how much information is out there and it seems so complex - way harder than just knowing you can just sticking up to 20k in a cash ISA and you won't pay tax on it. Can anyone point me towards some good resources (videos/books/websites) as I take the next step towards investing with confidence? Feeling really out of my depth :/

You only lose money if you sell when your fund is down compared to what you paid for it. You don't lose money just because the market is down, you still have the same number of units. That's why investing in the stock market is a long term game.

Check out Rebel Finance School and Meaningful money on Youtube. Use the time between now and the new tax year to educate yourself on investing in general. It can seem overwhelming but is doesn't need to be, for most people it can be incredibly simple. You need to think about what your objectives for investing are, over what timeframe are you looking to invest (should be 10+ years), is it for retirement or something else?

Try and get a sense of what your risk tolerance is. There might be a financially optimal model which says if you are 100% in a global ETF for 10+ years, they historically would average you 7-10% annual return, but some years could be up 30% and some years down 30%. How you respond in those scenarios will help you understand your risk profile. If it drops by 30% and you panic and sell, then that's not optimal, so you might not be suited to 100% stocks and shares.

Hi @kualitate

A few things I think are useful to know and hopefully to give you some confidence...

• You're on the right track with a regular monthly amount paid into a stocks & shares ISA via a platform - like Fidelity but there are others.
• Once you've set up your regular payment into it you'll need to choose an investment. The simplest way to do this is via a single fund. You might want more funds in the future but it makes sense to start with one.
• If you are sure you can leave this money for the long-term (min 5 years) then a fund that invests in the stock market makes sense. This means shares, sometimes also called 'equities'. You'll often read that it makes sense to hold not just shares but other types of asset too - bonds are the most common. In theory these are less risky than shares - they move about less.
• Given all that, a sensible fund to start with is the Vanguard LifeStrategy 80% Equtity fund (this is the one I use, as do many finance professionals). This gives you 80% in global shares, and 20% in bonds. There is also a 60% Equity version if you want to take less risk.
• If you go for this fund it's the 'Acc' version you want - this means that any dividend income that is generated is automatically reinvested in the fund. This is the version you want if you're just leaving your money to grow.
• A few things to help managae your expectations - your money can fall in the short term but, as explained above, this also means the money you then pay in will buy more of the fund and you get a bigger beenfit when markets recover. In fact, if you think you'll be paying in for a long time (and you should) then it actually helps you when markets fall - that's how you can 'buy low' and make more money in the future.
• You're very unlikely to lose all your money. Even the biggest stock market crashes have seen prices fall by about 50%, and they have recovered within a year or two afterwards. Mostly markets do rise - that's why we all invest our money.
• The long-term return from investments has been in the 7%-9% a year range but that may not be repeated. Right now, we've had I think three very good year in markets of 15%-20% a year. That probably won't continue and prices could fall a bit in the short term - but as explained this can work in your favour.

Best of luck!

You can only invest 20k a year in isas. This can be spread over cash and investments. But you cannot invest more than 20k.
The budget announced that you can only put a certain amount in cash from next year. The rest must be in stocks and shares.
Have a mooch around the websites of fidelity, Arthur Bell, Hargreaves lansdown. Do your research, they will all have articles for beginners. Choose whichever one you prefer.
Corporate bonds tend to be lower risk. They are also lower return but are a good starting point.
Remember to keep back some money to spend on your house. There's always unexpected expenses with a new home. Such is life.

Lots of good advice on here. Just want to say don’t beat yourself up for not investing earlier. You don’t say how old you are ( I’m guessing 30s/40s). I only started investing in my 50s and mostly through listening to the Meaningful Money podcast. Go back to the earlier episodes to glean the foundations of investing . Good luck !

Thanks so much everyone for the helpful advice and tips! Homework this holiday is doing my research and listening to the podcasts so I can get started and feel confident about investing come the new tax year.

And thanks for the support @TheGander - I've always been good at saving and thought I was doing the right thing, but my broker has been telling me I'm a fool basically for having kept so much money in cash and it really hit home how little I know. I'm in my 30s so starting to think about pensions/retirement now in a way I never did when I was younger and it seemed like such an intangible thing!

I've been investing for many years and I'm now retired. In my experience new investors (including myself in the early years) receive muddled messages that omit two major considerations:

1.Understanding why to invest rather than save.
2.Clarity about the common pitfalls of investing - and how to avoid them.

Once you have these ideas firmly under your belt, it becomes much easier to navigate choosing a provider, assessing whether a particular fund or investment is the right one for you, and building a portfolio.
Why invest rather than save?

• The potential for higher returns over the longer term (at least 10 to 20 years).
• Beating inflation - savings don't often beat inflation over time, whereas investments are more likely to outpace it. This helps preserve or even increase your wealth.
• Tax advantages for certain investments - such as S&S ISA or pensions.

Common pitfalls.

• Fees have a significant impact on the returns of your investment. IFA fees, platforms fees, management fees, fund fees, will all eat away into the growth of your pot.

Many people opt for an active fund where the manager makes the decisions about what investments to select - many default pension investments are in active funds. Great for the provider - not so much for the investor. Over a 20 year time-frame only 1 in 10 fund managers will beat their benchmark, meaning 9 in 10 people would've been better off picking a cheap tracker fund with minimal fees on a low cost or no cost platform.

• Concentration risk by putting all your money into a single stock, sector or asset class. Diversification will counter it by spreading the risk across many sectors, assets and locations. For instance, if you'd been unlucky enough to invest in the Japanese market over the last 30 years (as many Japanese investors did), you would be lucky to have 1% to 3% return per year - very different to other major markets around the world.

Such risks can be less obvious and more subtle - for instance the popular Vanguard LifeStrategy funds have a significant UK bias in investment weighting.

• Trying to time the market by panicking over stock-market market volatility and selling when there is a dip (an easy way to lose money). Or buying and selling frequently chasing tips and trends; or holding back on investment contributions because of uncertainty in the market, or ploughing it all in at once during a bubble.

Try to consider your investment goals and understand the common pitfalls, and you'll be well ahead of most novice investors. Many seasoned investors opt for a low fee global tracker ETF on a low cost - or no cost platform, at least to start with. This does avoid most of the common pitfalls.

Great post @TreesShootsLeaves . I do have several Vanguard funds and they are doing well but I take your point re UK concentration. May I ask what you think
are examples of well balanced funds?

Just to come in on the VLS point- the home bias is a feature rather than a bug for those who choose these funds. Having a decent proportion of your investments in your home market reduces currency risk.

There's also an issue at the moment with global trackers if you're worried about US tech being overvalued- with an ordinary global tracker something like 6% of your investment will be in NVIDIA alone, around 30%+ in US tech and 70% in the US overall (compared to around 4% in the whole of the UK). This might be what you want or it might not, but it's a good idea to be aware of the fact rather than assuming that a global tracker means you are well diversified. It's another reason why someone might choose a fund weighted away from the US.

(To be clear, I'm not advising for or against VLS or global trackers and I hold both. The key is to understand what you hold and why and to be happy with that.)

Was also going to suggest this. It has been life changing for me. Very accessible way of learning all you need to know. Highly recommend.

When I first started investing I chose Vanguard as it was a very low platform fee (0.15%) and I also chose their life strategy 100% fund because it offered diversity at a relatively low ongoing charge (0.45%). To be fair this isn’t a bad choice and did well for many years. I decided to switch it to a mix of funds where I could decide the amount of UK; Emerging Markets; US stock etc. Albeit I tend to leave them alone other than a bit if rebalancing. There’s now Vanguards Global All Cap which is reflects the market (coukd well be US heavy with 64% if allocation in N America) but includes all capitalisations including emerging markets across the world. The fee is 0.23%. There are also similar global index linked passive funds now offered on a variety of platforms.

I would agree with @NotDonna on Vanguards Global All Cap which includes mid and small caps.
@jadoreyes makes a good point about global trackers being heavily weighted to US tech companies at the moment, and that UK investments reduce currency risks. However, the OP's time-frame of possibly 30 years ahead for investing means the currency risks are likely to be are negligible compared to the performance of the fund. There will be many highs and lows, but a global tracker should naturally rebalance the weightings over time as new companies rise to the top and others fall away. As OP approaches retirement then de-risking the portfolio might become more relevant - but at this stage it's all aiming for growth.

Thanks everyone for these perspectives. I remember a couple of years ago everyone was saying don’t go for UK weighted funds as our economy is sluggish , the US is doing amazing, go for USA weighted funds. Then Trump got in, people started saying it’s too heavily AI oriented and heading for a downturn. It’s hard to find that perfect balance, but again that’s probably one of the reasons why it’s best to do it for the long term so regional blips get smoothed out.