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1. "What is investing?"
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Learning About Investing
Click on the questions below to see the answers to common questions about investing
Saving for the long-term
Think of investing like putting your money in a bank but where the interest you receive is uncertain and varies over time. Over the long-term, the expected interest is higher than what you'd receive in a bank to compensate you for the uncertainty. Historically, the return from investing in stocks/shares has been around 4% per annum higher than putting your money in the bank.
The interest (or return) you receive over time depends on the growth of different companies from around the world. Essentially, you own a part of all these companies, i.e. you have a share in the companies. Your money is being used by these companies to help them create new products, buy new machines, hire talented people and buy materials they need to build their products. By using your money, they should hopefully be able to increase their profits. As they earn more money, the value of the company increases and as you own a share in those companies, you get richer.
If money is like a 'seed', investing is the act of planting the seed so it grows. Most people just store their seeds and never see them grow.
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2. "What are the benefits of investing?"
Planting seeds means they grow into trees and those trees produces more seeds which grow into more and more trees. Before you know it you'll have a forest!
Using Money to make Money
Over the long-term, you should see your money grow. As the money starts to earn a return, you can earn more money on that return. Then, you earn money on that return and so on. This is the wonderful power of Compound Interest.
See how much your kid could have when they could have when they reach 18 years old.
And ... now imagine what they could do with that money! You’d be making a material difference to their life, especially knowing that at the moment less than 19% of 22-29 years have more than £1,000 in savings.
* assuming 7% per annum based on historical averages. The past is not always a good guide to future.
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Estimated amount at 18*:
Monthly Investment:
Age:
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3. "What are the risks?"
Risky if you need to sell!
It is true that the value of the shares varies over time. Therefore, the value of your investment could fall to be below the amount you initially invested. However, there is only risk if the value of your investment falls at the same time you need to sell your investment.
If you don't need to sell, then the change in the value of the investments should not be a real concern. Remember, investing is for the long-term. If you need the money in the next 5 years, don't invest.
The common issue is that people who invest get worried when they read the news and hear how the stock market has fallen in value. They then get worried and sell their investments and lose money. If those people had just ignored the news, they could have seen the market recover and be richer than before.
Trees can get damaged in storms. Many worry and chop down the damaged trees. The key is to leave the trees alone so they can repair themselves and grow back bigger and stronger.
4. "Do I have to pick companies to invest in?"
If you want a forest, you need to make sure you don't have just one tree, as a tree can die.
No you don't!
Picking which company is going to do well is really hard. Even the professional stock pickers get it wrong more often than not. Also, if you invest all your money in one company and then that company goes bust you lose all your money.
The alternative is to invest in lots of companies, therefore, if one goes bust only a small fraction of your money is affected. The other companies should more than cover for that loss. This is called diversification.
Don’t worry, there are simple ways to get exposure to lots of companies in one go without you having to cherry pick and research hundreds of companies yourself. Our guide shows you exactly how to do this.
5. "When is a good time to invest?"
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No one knows, so start now!
No one knows the right time to invest. Again, even the people who invest professionally, and claim to be experts, get it wrong more often than they get it right.
Therefore, the best time to start investing is now and the key is to invest regularly rather than invest large amounts at any one time. This approach means you avoid investing at lot of money at the worst possible time.
The sooner you plant your seeds, the more time your forest has to grow. For a forest to grow you need to be planting regularly.
6. "How much work is it to invest?"
Anchor 8
For a tree to grow, just leave it alone!
Once set up, little work required
Investing done well should be super easy and admin free!
People have the impression that investing is "buy, buy, buy!" and "sell, sell, sell". That type of investing is for those that are trying to beat the market and feel they can make some money quickly. The truth is that most of the people doing that lose money over the long term.
Investing at its purest is just finding a fund which invests in the whole market, automatically adding more money in each month and then, leaving it alone.
It's not the most exciting strategy but it is easy and, the best strategy. It's a bit like putting money into a savings account each month - the difference being the amount you get in your savings varies but if you leave long enough your investment fund could be much higher.
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I'm so happy to hear you found the guide useful. I want to help as many families as possible to open investment accounts for their kids. Therefore, I decided to provide the above guidance for free, rather than setting up a course for £100+.
That being said, it would be amazing if you could show your appreciation with a gesture of thanks below. This helps provide financial support to continue Bleu Tree and help more families. No pressure though.
With this gesture, you get:
1 x free copy of Grandpa's Fortune Fables paperback *
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* books only shipped to UK, US and Europe
1. Long-Term Mindset
Investing is a bumpy road. Don’t expect to make vast amounts of money quickly or get disheartened if it seems like it isn’t going your way after a short period of time. Invest your money and then leave it alone for months or years, i.e. don’t think of investing as ‘buy / sell / buy / sell’.
2. Ignore The Noise
This is the hardest one. When the stock market goes down, it can feel scary (like a storm) but markets always recover if you are patient. Also, if someone tells you of how they are making loads of money investing (bitcoin, GameStop etc), remember that these short term ‘trends’ don’t last and sticking to investing in an basket of companies over the long-term is the surest way to build significant wealth.
Many people don't follow principles 1 and 2 which means they miss out on long-term benefits of investing. "Buy and Hold" has been proven to be the 'winning' strategy when investing.
Now you know the key foundations of investing, it's now time to open an investment account. This can be a daunting task as there are so many options.
Below are 4 providers which vary in terms of simplicity, cost, investment options and service. Any of these would be a great place to open an account with and start investing for your kids (and even for you too).
I note that I am not affiliated with, or compensated by, any of these providers. This is based on my own research.
How To Start Investing
Helping parents set up an investment account for their kids (UK)
3. Don’t Pick Individual Companies
Trying to pick which individual companies will do well or poorly is super hard. If you invest lots of money with one company and it goes bust then you can lose a lot. Consider investing in a basket (‘an index’ or 'a fund') of companies so that you get exposure to hundreds or thousands of companies in one go.
4. Keep Costs Low
There are lots of expensive ways to invest, i.e. people telling you they can make you a lot of money if they manage you funds for you. Just remember, the more you pay in fees, the less money you are keeping (try to keep costs below 1% of the amount you invest).
Don't use your high-street bank for your investments as they usually charge a lot.
Below we help you find providers which allow you to follow principles 3 and 4.
STEP ONE: Understand the 4 Simple Principles to Investing like a Champion
(These are the same principles I advised my clients who were investing millions, sometimes billions, when I was a consultant)
STEP TWO: Find a provider of investment funds
7. "What is a Junior ISA?"
Tax free investing
Junior ISAs are tax-free UK savings accounts allow you to build up savings and investments for the kids. You can open a cash one or a stocks & shares one and anyone can pay into this until your child’s 18th birthday.
If you're saving for at least 8 years (ie your kids are 10 or under) then your kids are going to be missing out the long-term potential of investing if they are put the money in a cash ISA.
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Save up to £9,000 per year per child
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No tax on income or capital growth
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No withdrawals until their 18th birthday
You can transfer money from any insisting cash ISA into a stocks and share ISA (whole balance).
At 18, the account will become an adults ISA account and they can then decide to withdraw money or not.
If you are worried about them not being responsible at 18, then you could consider opening an investment account in your name and holding the money until you feel they are ready. Just make sure you tell them about it and surprise money doesn't usually last long.
Make sure you get to keep all that your forest grows
Beanstalk
Best For Simple And Cheap Way To Start Investing For Your Kids
Set up for families to start investing for their kids.
☑️ No minimum contribution
☑️ Pre-packaged investments
☑️ Nice app
If you want a no fuss way of investing for your kids, then this is the winner. The only decision you have to make is how much to put in stocks vs cash (makes sense to put all into stocks and keep cash in a separate bank account to keep costs low).
The app allows family members to contribute towards your kids' investments.
Investments: Your kids will be investing in thousands of companies around the world in a low cost manner.
Minimum Contribution: None
Costs: Approximately, 0.62% per year. (0.5% for the app and management and 0.12% for the investments). Equivalent to £6.20 for every £1,000 invested.
Nutmeg
Best For Families Who Want To Invest Together In One App
Vanguard
Best For Keeping Costs Low. No thrills.
Hargreaves Lansdown
Best For Greatest Choice And Human Help
An easy way for all the family to invest in one app.
☑️ Pre-packaged investments
☑️ Set up an account for your and the kids
☑️ Easy to use app
If you want to invest for yourself at the same time as your kids then this is the easiest option. Just select the investment page. Personally, I'm not sure the managed allocations add anything, so I'd stick with the 'Fixed Allocation' to keep costs down.
Investments: You and your kids will be investing in thousands of companies around the world in a low cost manner.
Minimum Contribution: £100 lump sum
Costs: Approximately, 0.6% per year. (0.45% for the app and 'Fixed Allocation' management and 0.15% for the investments). Equivalent to £6.00 for every £1,000 invested.
One of the cheapest ways to invest
☑️ Very low cost
☑️ Many simple investment options
☑️ Well established
If you know what type of investments you want then Vanguard is a very good choice as the fees are so low. This is the provider I use. It also allows other people to gift money to your kids.
Investments: You get to choose from a large range of fund which invest in companies from different countries, sectors and style.
Minimum Contribution: £100 per month or £500 lump sum
Costs: Approximately, 0.37% per year. (0.15% for the management and 0.22% for the investments). Equivalent to £3.70 for every £1,000 invested.
Whilst not the cheapest, they offer a wide range of investment options
☑️ Wide range of options
☑️ Good customer service
☑️ Well established
If you want a lot of investment options to choose from, i.e. you know what you are doing, then HL is a good option. They also have people you can speak to if you need help.
Warning: Watch out that they don't try to get you to invest in one of their expensive investment funds. Keep your total costs under 1% per year for investing.
Investments: You get to choose from a large range of fund which invest in companies from different countries, sectors and style.
Minimum Contribution: £25 per month or £100 lump sum
Costs: Minimum 0.52% per year. (0.45% for the management and 0.12% upwards for the investments). Equivalent to £5.20 for every £1,000 invested.
STEP THREE: Invest regularly and let your kids know
Once you have picked a provider, set it up so you invest monthly automatically. This will allow your kids' investments grow over time.
Remember to not look at the investments too often so that you follow principles 1 (long-term mindset) and 2 (ignore the noise).
Make sure your kids know about their investments and show them the progress over the years. This education will help them invest for themselves when they are adults and that could be worth thousands, even millions!
Don't delay, open an investment account today!
Any questions then please let me know (will@bluetreesavings.com)
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I'm sorry to hear that you didn't find this guide useful. I am always looking for ways to improve what I offer in order to help more families start to invest for their kids. If you could please share any thoughts on way I can improve this guide, I would be very grateful (also, any suggestions you make that I end up implementing, I will give you a FREE copy of my book Grandpa's Fortune Fables as a thank you!)
Please let me know using my direct email: will@bluetreesavings.com
Thank you.
Will
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