A Savings and Investment Special!

Hello, I'm Martin Lewis, and this is the cunningly named The Martin Lewis Podcast. I do wonder what that's going to be about. Now usually much of it comes from my BBC Radio Five live show with Adrian Charles, and this one is extra special. Oh yes, indeedy, because I'm on a break, so it's a good excuse for a best bits pod. The producers have put together what they think are some of the most pertinent and still relevant elements of the podcast we've done so far this year. Let's just hope they're right. Though worth noting, if I do mention specific products, do be aware they could have changed, so double check before you take any action. We don't want you listening to February's Best Buys once you're in August. This episode is a savings and investment bonanza. I did a beginner's guide to both, so we've morphed them together. Who should be investing where and how to maximise your interest from savings? Oh, I'm so excited, just play the theme tune. These are my five questions people should ask themselves about their savings to help them decide what to do. So, here's the first one. Do I want to maximise every penny or decent, easy solutions? Do I get in every penny or is it just about something easy? This is about effort versus reward. What most people want, I will be honest, is they want one or two savings accounts that pay them a good rate that they don't have to hassle or worry about. You want to be getting at the moment at least four and a half percent interest. You put your money away in it, you forget it until you need it and it needs a little bit of managing. That's one solution and we'll be talking about that. Then there are some people and they tend to be people who listen to what I talk about who want to maximise every penny, so you know every single penny of the money you're putting away in savings is earning the most possible interest. That will usually be, you know, think of a champagne fountain, Adrian. You know, you've got the glasses on the bottom and then the glasses above and it goes up to the pinnacle of just one glass on the top. You know what I'm talking about? Then they pour the champagne in the top and it fills the first cup and then once you've filled that one, it spills over to the next level and if you're lucky enough to fill, well, that's what we're trying to do with savings in the perfect solution. You maximise every bit of savings in the one that pays the most. It'll be something like a regular savings account where you drip feed up to 300 quid a month at 7% interest. Once you've filled that, you look at the next tier and then once you've filled that, you go down in tiers so every penny you've got is earning the maximum. It takes work, it takes effort, it takes monitoring, it takes savvy. Decide at the start which you are. Are you an easy life and I want it to be pretty good or are you, I want to maximise it, maybe get a 20 or a 10th more on talking because every single penny is perfect and I've got it all in my spreadsheet. You've got to decide that at the start. As you put your arms above your head then, I've got quite distracted by the muscle definition in your arms. Thank you very much. Nice biceps. I've got guns. Sun's out, gun's out. OK, second question. Can I lock money away for years or do I need access? So this is a really important question. You're defining what you want with your savings. Are your savings something that you need to be able to use and spend or are they something where you can put them away for a defined time that you will absolutely not be able to touch them in that time? If you're going to be put them away for a defined time then you can take a fixed savings account. Now in a fixed savings account, the interest rates tend, although they're not always, to be higher and they're guaranteed. In easy access on no notice, which is where you can take your money out whenever you want, the interest rates are variable so they can move, so you need to monitor them, they can go down, they can go up and you need to be on top of them. With a fixed account you put money away for two years, you know exactly what the interest rate will be. It's locked in, it's guaranteed but you can't access it. With the one exception of fixed rate cash ices, they're not allowed to lock your money away but if you take your money out of those you will lose some interest. So it's really worth having that thought. We're going to go through all the best products later but is the thought, how much of my money do I need access to? How much can I lock away? I mean clearly you might have 30 grand, you might say I want 10 grand of access to it and you should always have a rainy day fund of a few months of bills and I want 20 grand where I'm going to be lock it, I can lock it away and then I can get the guaranteed rate. So I ask myself now am I putting new money aside regularly or is it all a lump sum? I'm really feeling the depth of the question. So this is a very simple one, I mean if you're putting money aside regularly there are special accounts called regular savings accounts that only allow you to put a relatively small amount of money in, up to two to three hundred pounds a month but the interest rates are much higher. So that is a useful way to save, they tend to only last a year or so, there's a whole list of them. Alternatively if you've got a lump sum, well you can drip feed it into a regular savings account to get the higher interest, if you're doing that let's play it to the maximum. For most people you'll just want to put it all in one place. Just a tiny little note because lots of people get in touch with me about these regular savings accounts and say it's a con, it's a con. I don't know why they use that voice but they do. I don't know how they do it in writing but they do. It's a con, it's a con. And this is the reason why they say that. Let's say it's paying seven percent interest and you're putting three hundred pounds ish in a month. At the end of the year you've got three grand in the account and they go I've got three grand in the account it's seven percent interest I should be getting two hundred and ten pounds interest and they look in their account and they've got a total of a hundred and ten pounds interest and they go it's a con, it's a con. What's actually happening is you only get paid interest on the amount that you have in the account. Now if you think about it you're putting in roughly three hundred pounds a month. Well you only have three thousand pounds in for the very last day. The month before you had two thousand seven hundred in you know six months you had fourteen fifteen hundred quid in. So actually the way to think about it is I'm going to get roughly half the interest I think I would because while I've got three thousand pounds in at the end of the year because these accounts normally last a year my average balance over the year is about half that fifteen hundred quid so I'm going to get roughly seven percent of fifteen hundred quid. But the crucial point about them is on the money that is in there you're still getting the best interest possible compared to anywhere else. So if you were moving it from a lump sum account so let's say you had your money in five percent easy access savings and you were dripping that across into one of these regular savers you're still earning money on the five percent easy access savings while it is moving into the regular saver. So don't not use a regular saver because of that mass it's it's you're still getting the most interest on whatever money you had in that account. Stop right there I'm interrupting the pod because I just want to talk in a little bit more detail about cash ices while I've got a moment to do so. I've been doing this particular analogy since 2001 and it's not still yet I think it always works so I'm going to do it for you now. I want you to picture a cake we're going to think of it like a chocolate cake that's going to represent cash savings money in savings so equally it could be a strawberry cake to represent shares. Now normally when you've got money in savings account the tax officer can come along and take a bite of the interest tasty. But all an icer is it's not a product it stands for individual savings account it is a wrapper like a protective piece of cling film that you can wrap around your cake. The cake is still exactly the same chocolate cake it's still the same savings account if it's easy access it's still easy access you can take your money out when you want if it fixed it's still fixed the money is locked away with a guaranteed rate of interest it's still just a savings account the only difference is it now has this wrap around it and that means when the tax officer comes along oh they can't bite it anymore because it's got the protective cling film around it. So when we talk about cash ices people tend to think it's something different you're my money's locked away I can't change provider no a cash icer is just a normal savings account that they it where the interest is not taxed you get £20,000 a year maximum that you can put in a cash icer once it's in the cash icer it stays tax free year after year until you take your money out there's no tax when you take the money out it's just then it's no longer in the ice so you don't get the tax protection anymore so if you were to be have savings that were taxable and you put it in there it'd be tax but as long as it's in the icer it's tax free year after year so you could put 20 grand in this year as long as they don't change the allowance it's 20 grand next tax year 20 grand a year after that and people could have a lot of money inside cash icers inside that cling film also crucially don't think when you've got your money in a cash icer that's it you can't move it you have a right to transfer your cash icer so that means if your cash icer rate drops and they will do certainly if they're easy access or when you fix ends you can simply go to a new cash icer provider you open it up and within the form you don't have to put any new money in you fill in the transfer details most cash icers will allow you to transfer it will then take the money from your existing cash icer and put your money in that cash icer all within the cling film you're never taking it out you're not losing your tax free status and crucially transferring does not count towards your allowance so I said you're allowed to put £20,000 a year in a cash icer well if you've got an older cash icer that you're transferring to a new provider that doesn't change that 20 grand a year the 20 grand a year is for new money so hopefully now you understand that cash icers are a piece of cake. I want to talk to you about the help to save scheme it is by far the best paying form of savings you will ever get and if you have access to it it is the first place you should be putting your money but interestingly I haven't had any questions on it which worries me that not enough people know about it so I'm going to talk to you about it in brief here. The first crucial part about help to save you need to understand is it is only available if you are on universal credit and you work and you earn at least a pound they've actually dropped the threshold recently of how much you need to be earning in order to get help to save so it's now just a pound and what it does is it gives you a 50% boost on what you save even if you have withdrawn the money so anyone on universal credit you should be opening this up even if you don't have the money to put in it right now because even if you were to get extra work that meant you were no longer eligible for universal credit you would still be able to keep this account open once you've opened it. So here's how it works. You can save up to 50 pounds a month in it and after two years you get a 50% bonus on the maximum that you had in it. Let me try and explain that so let's imagine you're maxing it out you're putting 50 quid in a month you've got 50 quid in 100 quid 150, 200, 250, 300, 350, 400, 450, 500, 550, 600 you've got 600 quid in no you've just had an emergency your window's been smashed it's terrible you're going to need to pay for it it's going to cost you the whole 600 quid so you do that you take your money out of savings instead of having to borrow for it and you therefore pay for your new window ignore you might be more than one window we'll call it cost 600 quid you get the point I'm trying to make. Now you've got nothing in the account and unfortunately you can't afford to put any more money in the account for the remaining two years at the end of the two years you get a 50% bonus on the maximum you had in the account well the maximum you had it was £600 so even though you have nothing in the account now you still get a £300 bonus even though you took the money account out and then for another two years after that you get another 50% bonus calculated on the maximum balance you had in over the second to two year period compared to the first two year period works in a very very similar way it's absolutely off the charts for people who use it if you're on universal credit and you work you should be opening a help to save account it is by far the best form of savings possible. So that's the best bit of savings now let's do the best bit of investments take it away Martin. Okay so I'd like to welcome first of all Valerie Wilson who is a chartered financial planner at Johnson Carmichael Wealth Valerie hello. Hello. Thank you for joining us and Louise Clareau a managing director of Circle Financial Services and an independent financial advisor. Okay Louise what do you do for your profession for people who are the very basics and don't know what an independent financial advisor is? My role is to understand what somebody wants to do from a financial point of view and set a pathway up for them that may or may not involve regulated products. So banks, cash building, societies, national insurance that's all nice and easy but you might start straying into things like financial advice and I deal with that so I set people on pathways and I'm what's called whole of market so I can look at the entire universe within certain parameters that the regulator allows me. So what you can do that we should say the difference between advice and guidance you give advice is if somebody comes to you and you follow all the regulations do a full fact find and get all the information off them then you can tell them specifically what to invest in when we're talking about investments. You know you could say this fund is a good one for you and mix with these two couldn't you? Absolutely and I think critically it means then that if it goes wrong in the future and my advice and you took it turned out to be wrong you have got recourse back to me. Although it's worth stating we're talking about investment here so clearly you cannot know what is going to happen in an investment in future what you're talking about is making sure that the risk is appropriate for someone you know there is still a chance that an investment can drop after you've recommended it and you wouldn't be on the hook for that would you? No as you said performance is not necessarily something that you can go and make a claim over but if I put you into a funds that was clearly weighed high too risk and you told me in actual fact you were a more cautious investor then you could potentially have recourse back to me and get your losses back. So for example someone comes in and says I want to be cautious I want to take a little bit of risk but not too much because I'm getting you know I'm moving through my I'm getting a little bit older I don't know quite where where I want to go and I need to keep my money safe and you said let's put all your money in a single tech stock which is about as high risk as you're going to get a single share I mean clearly that would be an appropriate but if you said we're going to put in a basket of global assets which seems to be appropriate for you and this should do well and it dropped in performance you couldn't come back. Let's go to Valerie now now you're a chartered financial planner can you explain the difference between that and an independent financial advisor for us? Yes so where we start with when I see a new client is we understand where they are today and their objectives over kind of short, medium and long term and we really build a plan for their future and make a plan as to how to meet all those objectives over time. Once we've then got that plan that's when we move on to the investment side of things where we would recommend certain products and certain investments to meet those objectives over time and similarly we would have discussions around investment risk and sustainable preferences to work out what type of investments they should be investing in. Okay so that's what they do it's worth me saying as well look I mean getting independent financial advice or chartered financial planner their professional services and you pay for them they tend to be targeted at people higher up the income level or higher up the wealth spectrum. You do not need to go and get that help always at those who have substantial funds absolutely it is worth paying to go and get yourself advice looking at the risk looking at the tax implications looking at your planning but for many people it won't be fundable. You can invest by yourself though there are platforms out there that will help you to do so and you can be looking at this so this isn't only for wealthy individuals investing let's start with a question and we've had many many questions coming in Steven says I'm saving to retire in a few years it's just sitting in the bank earning very little I would never invest as I don't know enough about it and do not want to lose even a penny. So let me start on that Steven first thing is sitting in a bank account is a terrible thing to do as the very basic minimum you should have your money in a top savings account or top cash isa there's no risk to putting it in savings probably a good point to define the difference between savings and investing actually. Saving is where you put your money in a financial institution it has deposit protection which means the amount you put in will never drop and you get a defined amount of interest. Now the interest may be variable so it may change over time but you know what you're going to earn so four percent interest on a thousand pounds would mean at the end of the year you have one thousand and forty pounds in it. Your money up to eighty five thousand pounds per person per financial institution is protected by the financial services compensation scheme so in the unlikely event a savings institution went bust you would at least get that money back what would tend to happen is your savings they tend to move it to a different institution or investing where you're putting your money into shares or bonds in the hope that the amount that you have grows it might grow because of dividends it might grow because of capital growth so that you in future are able to sell it for more hopefully substantially more than you bought it for but there's no guarantee that you will be able to that's the rough difference between the two so Louise someone who says I would never invest as I don't know enough about it and do not want to lose even a penny what you say to them. Educate yourself now if this person cannot afford to get financial advice start looking at some quality FCA regulated platforms that will give you some really good help and advice one of the places you could go to is Money Helper which is a government sponsored website and that just runs through exactly what risk is the different types of categories of risk what I would say is it is actually risky having all your money held in cash for the simple reason ignore institutional sort of invest going bust or anything like that let's assume they don't and they probably won't but each year that your money is in cash and not earning enough to keep pace with inflation if this is for retirement then the real value of it in 10 15 years time is actually going to go down so on paper it might be the same pound but the buying power is substantially less so that is risk in itself so I would just say that at the moment the top savings do outpay inflation but we had a long period where the top savings are actually losing because your money was eroding in inflation returns over time money will lose its buying power and that simply down to this horrible thing called inflation so if you are going to invest or you're looking at drawing down over time it is worthwhile having some money in something other than just cash which at the moment is being outperformed by equities it's interesting because I phrase this as to save or invest the answer isn't to save and invest it's likely for most people to save and invest right what you want whenever you've got assets if you're lucky enough to have them is you want to spread of assets some of them you want in ready liquid cash which you want to have available which you should be saving some of you want in investments to grow the amount of risk you take depends on age and your financial circumstances but Valerie I suppose that the real concept we're trying to just do the basics at the beginning the real concept here is people think that they're going to put money in an investment and you know it's going to be incredibly volatile and it's going to move up and down while the vast majority of standard investors are not putting money in an individual share they're putting money in a fund aren't they and that's a collective investment which has loads of different products inside it could be you know you could be doing a globally spread of assets where you're invested in thousands of companies so one company doing badly won't have that big an effect and you're looking at the net effect of all of them together which over the long run should outperform saving yes that's right and I think it's important to define investment risk because what we mean by it is as you say the volatility so how much it will go up and down but if you look at historical performance of investments over longer periods of time investments have always outperformed cash it's just in short terms the value is going to go up and down so one way to help reduce the volatility is to hold a very diverse portfolio so what I mean by diversification is you need to hold it across different types of assets so for example stocks and shares bonds commercial property commodities right stocks and shares are effectively when you're investing in the value of a company and so you own a portion of that company and you might get growth in the value of the company in other words someone would buy it off you for more than you bought it for or you might get dividends where if the company's making profits it likes to distribute some of that to shareholders what was your next one bonds yeah so bonds you get government or corporate bonds and essentially a bond is when you loan money to either the government or to a company in return for the loan they will pay you an interest over time and at the end of the term you will get a maturity value back commercial property is pretty obvious so but most people can't afford commercial property would you be investing in a portion of a commercial property is that what you're talking about yes that's what I mean you can get exposure to commercial property through holding funds right so those are funds that are investing in a spread of commercial properties for you so that you know many people always talk about I don't want stocks or shares I prefer property you can actually invest in property and you can invest in commercial property through a fund that is available you know to buy through the markets you don't actually have to go and buy the property yourself yes that's correct yeah and the last one commodities so that's things like gold oil and gas chocolate sugar port barrels all of those things commodities stuff that you're sitting on and you're infectionally you know you might have bought chocolate the price of cocoa has gone up very rapidly over the last four years if you bought it and hold a you know a nominal a virtual stock which is what investing is of cocoa you might have made money from it so that's investing and it is about that spread isn't it and so what Stephen the real thing is you're saying you don't want to lose any of your money well there's always a chance but you also want it to grow more quickly and so what you have to do is look at how much of your assets you're willing to take some risk on but the wider the spread of assets you have the less you're likely to see really huge growth the less you're likely to see really huge falls that's right isn't it Louise it is and what I would just say here Stephen let's just pretend you're 58 and you're looking at retiring at the age of 60 that 60th birthday does not mean that on your 60th birthday you're suddenly going to need however much is in your pension fund all at once the reality is that pension fund that you've accumulated let's just pretend it's a hundred thousand pounds that's going to be drip fed to you over the next 20 30 years so there has do not worry about investing for the future even though you think oh my god I'm retired I have to keep it all safe no you don't because you only need to keep safe what you realistically think you're going to be drawing down over the next three or five years can you explain that term for us drawing down is where you take a monthly amount out of the pot of cash that you've got set aside for your retirement let's just say it's in a pension fund it could be anywhere but it's the amount that you are taking down each month but the remaining capital if that's not going to be used over the next two or three years you need to think okay can I reasonably look at putting some of that into something that's going to potentially get me a better rate of return because I'm still going to be here hopefully when I get to 70 so I have got a 10-year horizon so we're interesting we're talking about time there and Valerie mentioned it earlier as long as you're putting it in a reasonable length of time so what would you say for you know someone with standard finances is the minimum amount of time you should be looking to put money away before you invest it is it one year two year five year ten year fifteen years Valerie yeah so I would say you would want to do it for a minimum of five years that is because that either gives the investments time to recover after a fall or it gives them time to grow and fall so that's kind of the time scale and which you would expect to get back at least and hopefully the growth on what you put in okay so I'm going to run through some of the other to save or invest questions which is the first section I've got here and we'll go quickly let's ask Louise two questions together here Fiona what ratio of money should you have in savings and investing e.g. 70% in savings 30% investment and Steve similar my initial question was about the ratio of cash savings to investment what's a good balance in asking that question I also need to include age as a factor as well as income to savings ratio and level of risk so let's have a little bit of very rough generic guidance here Louise on what proportion of your asset allocation you'd have in savings and what you'd have in investment in general right so depends on age depends on goal and it depends what you're wanting to do and also what your current income levels are so let's get a scenario going here let's pretend that you're 30 years of age let's pretend that I can pretend that I can pretend that right yes right so we've got Martin looking nice and healthy at the age of 30 you've just bought your first house you're on the housing ladder you're now paying bills out in other words what's coming in is pretty much what's going out you're nicely sort of shackled up because you're got a house and you're running things you probably are not going to have a lot of money left because you've just spent all your capital buying a house and putting a deposit down but so therefore you want to slowly start to build up your assets again therefore you're probably only really looking at being able to use the disposable income to put it into a savings account by savings I mean you want to start building back up putting it into cash based accounts because what you don't want to do is deprive yourself of being able to come and get that cash out if for example your new house has got a broken gate or the boiler bursts or anything like that so you need to start back go into cash once you are lucky enough if you get a bonus and in your 35 and you get a windfall let's just say you get £10,000 from somebody you can then perhaps look at putting that £10,000 into something that is investing i.e longer term and you can do that because you've built up some savings in the meantime as your buffer. So your investment is for your non-crucial money the money that you're not going to need to touch in the next five years or so so you can put it away in that time as you get older as you move through that income scale. Clearly you know you might have a little bit more let's talk about let's meet somebody now who's age 50 they're mostly paid off their mortgage they've got decent income coming in and they've built up a reasonable pile of savings let's say £80,000, £90,000, £100,000. What proportion of that would you want to be looking at in investments? Everybody understands this is very generic it's always specific to the individual. Well back over to me again then I would say if you've got everything you've got all of your various sort of liabilities out of the way everything's under control. If you've got an investment if you're 50 you've got an investment horizon of let's just say 10 years or so there's no reason why you can't be putting 75% of that into investments. On the basis that you've got income coming in it still gives you £20,000, £30,000 that is kept aside for a rainy day to meet bills, unexpected items, what I call yellow beak money which is your children that have flown the nest that you think have gone then come back saying mum dad can I have this can I have that their bills are always more expensive as they get older it's strange that isn't it. So I would say as the older you get the more financially stable independent you get the more you can look at putting investing aside. And then though as you get even older and you start to move past retirement and into older age then what you need to do is diminish your risk because you don't have that long for it to grow. So there it's a curve here isn't it you start off younger you probably want to be more in cash unless you've got a very large amount of money and investing less because you can't afford the risk. As you go up and you get more wealthy and more affluent if you're lucky enough for that to happen to you you want to take more investment risk but then as you move towards the ending the final years of your life you bring the risk down. That's exactly it there's a posh word we use in the industry and it's called lifestyling which means that as you're accumulating and you're building up then you're building up but then as time goes by like you said you get that curve and then you start to want to become more cautious you don't want to start to take risks you start to move away from higher equities or higher investing and your ratio towards savings i.e cash base starts to increase so it reverses back again. So Jane says I hope you make it clear that the value of investments in assets such as shares can go down as well as up. Folks need to understand the risk versus reward and make sure they're not coerced into investing by some financial advisor they need to choose wisely. Ian says lots of people talk about risks as the barrier to entry for stocks and shares however what are the real risks in a global index fund diversified over 3 000 plus companies that you hold over five years are the compounding returns not worth it well yeah that i mean that's the basic premise you know if the worldwide economy is growing and you're invested in it it should outperform savings because that's the way that the world works although there are no guarantees and i do think what's interesting here is one of the things the chancellor said is that for so long we've put all these risk warnings and there are a hell of a lot of risk warnings on any investment past performance does not predict future performance investments can go down as well as up that we have you know all the nudge factors and the barriers are actually trying to put people off investing they're not meant to be doing that they just want people to know the risks in advance and i'm not sure you know risk is a fascinating term risk is a term that just means variants of outcomes it means positive or negative so risk when you take high risk the hope is you're going to get high growth the cost is there's a potential that you're going to lose some of the money that you put in and just understanding that risk shouldn't always be seen as a negative risk is something sometimes an opportunity is something i think we don't necessarily use the language when we're talking about investing i think that's where the chancellor's going and as long as we still remind people you know don't put your money in that thing if you cannot afford to lose a penny then i think we can start to change the language and the dynamic of the way that we talk about it in the uk in the us the culture of investing is so different louise what we have to remember here is that since 2008 the big financial crash everyone was queuing up outside getting all their cash out and then the financial services industry was their big big bad boy as were the banks this is where the regulation became even more and more onerous to the point that in the industry we almost call compliance and regulatory intervention the the business prevention unit you're absolutely right you can send a report to a client and all they want to do is a simple 10 000 pounds cash isa or something like that you can have two or three lines saying this is what you want to do in the reasons why and then before you know it you've got another two pages of all this compliance blurb that it points the investor off we're trying to strip all that back let's get rid of all this overburden red tape and let's start getting it to a position where somebody can come in off the street they can go and access guidance without having to get embroiled into a whole pile of blurb that waters down what they're actually trying to do and puts them off okay let's move on to the next section which is the basics of investing Alan first realistically if you were to start to invest now what's the minimum amount you would say is realistic for it to be actually worthwhile well i mean any amount is realistic you can put in 10 pounds a month as long as you can afford to put that money away and you hope you get some growth on it but most people are looking 50 or 100 pounds a month what would you say on this one Valerie you're absolutely right Martin in that any amount is better than nothing so even if you've got a spare 10 pounds a month that you can spare that you don't need to spend in the short term then yes get it invested because actually getting into the good habit of saving into different investments can build up into a very large pot over time and it's getting into that regular habit of doing it that can make a huge difference people are often put off by the final mile on this i mean if you really want to start on a small amount there are a number of robo investing firms out there go and look them up where they will decide you know they'll try and skim money out of your current account for you and put it in an investment and they'll decide what the investment are trying to make it all a little bit easier for small amounts of money but i mean there is no amount too small as long as you've got always keep your cash emergency fund always have two or three months of bills in cash in case something happens so that you're able to afford that but above that you could start to invest i mean let's i think we've got aron on the line aron are you with us you've got a question i think hi martin i'm here at the moment i'm just trying to like get into investing i just really wanted to understand what the best platform for someone just trying to dip their toes into investing is because i know that the small amount of money i'm going to put in the fees are going to overwhelm the upside of any investments so roughly how much are you talking about putting in and what platforms have you looked at so i was thinking about a hundred pounds a month yeah um i've i've heard names being thrown around like harbors lands down a j bell thank god but i just don't know which one to pick well harbors lands down and a j bell there there are platforms out there that you can put in their non-advisory platforms so you can read a little bit about what's going on and they make it quite simple that you put your money in and choose what's going on louise do you want to take this one yeah aron the if you go google which which have just done a survey 2025 so it's relatively up to date and it lists down lots and lots of platforms and like martin said you've got the key big names there harbors lands down a j bell and it does a little bit of a comparison sort of looking at the cost and the charges and all those sorts of things generally for a hundred pounds a month that's a really good amount if what you're looking at doing is investing in but why that i mean putting it into something that involves stocks and shares a hundred pounds is a wreck 25 pounds a month hundred pounds a month is about where these platforms will start there's one thing that you might want to consider is that there is a platform called vanguard now it's slightly different to the others the a j bells and the harbors land downs of this world have got really good portals and they'll create ready made portfolios for you because at the end of the day you're not a fund manager not an investment manager and they'll ask you some questions and they'll come up with a portfolio that suits your risk that you feel comfortable with and they look at the whole of the market and we've got lots and lots of things on there so that means a whole of market that means you can buy shares you can buy investment funds from lots of different investment from providers both uk and abroad and you can buy some you know gilts and a whole the whole range of different investments are within their platforms absolutely whole range of lots of different funds critically managed by lots and lots of different fund managers because no one fundage manager can say that they've got the absolute golden bullet for how things work vanguard is different vanguard is a very good way of accessing something called an index instead so common index is 4100 s and p 500 you've got to ask yourself if i pay a fund manager and you've already alluded to the fact you don't like charges being taken off your money and why should you you don't mind people taking money if they're going to do a better job but if that fund manager at the end of five seven years hasn't actually done any better than the index well what was the point of paying the fund manager and this is the argument that passive investors will use and what vanguard do is they have a series of indexes so it won't ever do better or worse than the index you're simply tracking an index and it's a very low cost way of doing things i think it's a really important thing i'm going to just come in and make sure that people understand this so when you have a fund manager they're a stock picker so they're employing someone to pick stocks you might have a fund that is us smaller companies and some stock picker someone is employed to go and say i think these are going to be the us smaller companies that do really well over the next five years i'm going to pick a hundred of them and here's how i make my decision and because of that that fund has a higher charge than other funds because it's employing people to pick shares for you an index let's take the footsie 250 so that is an index of the 250 biggest firms listed in the uk stock markets that's how it's decided i mean there are some complexities i'm keeping it simple but it's simply the 250 biggest uk firms so when you invest in an index fund you just have a computer that is managing a mapping that you are investing in the same proportion as the index that is set up there's no one picking funds for you it's just giving you a widespread of that index and it might be s&p or it might be nasdaq or it might be you know something in chinese indices so an index doesn't have anyone picking stocks it's just trying to mirror a performance of a certain sector or a country and therefore when you're investing in it the fees are lower now absolutely as we've talked about if you have a stock picker who's brilliant and gets it right then it may well be worth paying the fees but on average you're going to struggle so picking a passive fund which is one where it's just based off the index well well it might not perform quite as well as some managed funds as the fees are lower that can really have an impact so at least you're not paying someone lots of fees if they're going to out underperform fair summary louise i think that's really well done tell out to ten martin i should do this for a living you should do shouldn't you but van god um talking about van god specifically it's their indexes it's their indices which are as you've described they do not and will not offer you for example a trodha fund or they won't offer you other fund managers it is simply indexes and that's their own indices that they're doing i mean well it's there yet they're managing and their algorithms are matching that indices so all you're basically going to have your investment dragged down by is number one the cost of the platform which is going to be on that's very low and the actual cost of getting someone to put it onto this algorithm it's given idea it's about point one five point two percent at the very most compared to a normal fund i say a normal mainstream fund which could be as much as point seven point eight so there's a big difference there half percent a year it's a lot of money it's important to look at how the fees are structured as well because some platforms will charge a percentage fee whereas some platforms will charge a monetary fee it's important to look at exactly how the charges are structured and also whether there's any minimum charges and transaction charges that apply because on the face of it it might look cheap but there could be other transaction charges associated with it so aran this is the important thing to look at you've got two levels of charges you've got the platform charges i the platform that you're buying on the facility that you're using to buy and sell funds or shares and then you've got the second one which the individual fund charges within it now it is worth saying with the other platforms like Hargreaves Lansdowne and AJ Bell you can buy index trackers within them as well and they might include even vanguard but whereas vanguard you're going to have the low platform fee because you're just buying its own index trackers and what's your thinking on this where does this all leave you have we confused you've been made it easier you've made it easier aran one thing i would say to you there are a few more challenger investment platforms aren't there which are pretty low costs like your trading 212s your invest engine free trade which have different types of fees that your AJ Bell's Hargreaves Lansdowne interactive investor in fidelity are more established platforms with higher fees but vanguard if you're just going to go for vanguard funds can be a lower option the difficulty here let me be really honest with you aran right and one of the problems in doing this pod is regulations mean it is difficult to give you a recommendation because you haven't had a financial fact fine someone has not sat down with you and found all your considerations so getting someone to actually say which is cheapest is quite tough my biggest advice for you don't be put off investing because of this don't be put off investing because of the final mile the differences between these funds and these platforms is not that big compared to the difference of you not investing so if just go for it if it's right for you go for it do you want to mean by that yeah no that makes sense you know it's not going to be that prohibitive there are lots of choices trading 212 has no cost no fee to buy yourself funds no fees to buy ourselves shares can be managed online or an app invest engine is similar you may find those to be the easiest way once you know what you want to do but buying yourself getting yourself a nice spread of investments in index funds is a good way to start with your hundred pounds you know it's cross your fingers money i hope that's how you're approaching it and hopefully it will work well for you in the long run that's very useful thank you that's it for this week and this savings and investment best of pod special if you've enjoyed it tell your friends you've been listening to the martin louis podcast we tend to put a new episode out every thursday so why not suggest they subscribe to martin louis is the founder of moneysavingexpert.com but of course other consumer and price comparison websites are available you can get in touch with martin's podcast production team by emailing martin louis podcast at 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