45. 1st Stocks & Shares ISA - Everything you need to know

In this episode we are going to walk you through everything you need to know and do to be able to invest in your first stocks & shares ISA.

Knowing why you are investing is key to being a successful investor and we covered that back in episode 21. You need some cash for emergencies to before you start investing, and you can hear our thoughts on that back in episode 28.

How long? Knowing the timeframe for your investment will help with some of the decisions you are going to make. Are you investing for something in 5 years, 20 years, longer?

How much risk? Too much or too little risk can be equally bad. So how do you find what is right for you? We mention the Beam app, which sadly is not currently available. There are lots of tools out there to help you with this, a simple one is on Standard Life’s website

Hands on or hands off? You have 3 options as to how involved you want to be with the investment:

• Robo
• DIY
• Adviser

We’ll explain what asset allocation is and why it’s important. The role of ‘point and shoot’ funds, and how they can fit into a core and satellite approach. 

 6.22 Julie explains risk
12.42 Robo, DIY or adviser
25.13 Active & passive investing
31.11 List of Robo advisers
31.48 How to pick funds
38.37 Charges 

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YOUR HOSTS:
Catherine Thomas-Humphreys is an Award Wining Financial Coach, Qualified Financial Adviser and Family Will Writer.

Catherine believes money is a force for good and when in the hands of good people can be used to do great things.  She loves working with purpose-led parents who are ready to change  their money habits & beliefs to achieve  financial success for themselves and their family.

She founded #TheFinfluencer   as a safe space to coach and empower parents to influence, make, save, spend and grow money, consciously, ethically and positively.  

The Finfluencer|Finfluence|Instagram

Julie Flynn is an experienced independent financial adviser and financial coach. Justice and equality drive Julie. Which is why she’s spent years studying and researching how stress affects our financial decision making.

She uses her years of experience and research to support women experiencing or planning significant change in their lives. 

Julie is best known for her work with women who have lost their partner and coaching financial services business who want to implement fair and transparent charges.

Ebb & Flow Financial Coaching|Bree Wealth & Tax|Instagram

Transcript

WMC 45 First Stocks & Shares Individual Savings Account: everything you need to know

Julie: [00:00:00] Welcome to the women and money cafe, the weekly money podcast for women by women exploring the practical and emotional side of money. The cafe isn't just a podcast. It's a community for women to feel financially empowered and have fun along the way. So come and join us in our Facebook group. Your hosts are Julie Flynn and Catherine Thomas Humphreys.

Myself. I'm an independent financial advisor and certified financial coach. And I work with women where life is taking an unexpected time to help them manage their money with confidence and envisage a new future. Catherine is the founder of the influencer. She's a qualified advisor and financial coach and family finance expert.

She helps parents to financially impair their family and create positive relationships with. Themselves. And those fell off

in today's episode of the women & money cafe. Catherine and I are going to talk you through all the steps you need to take if you are ready to make that first [00:01:00] investment in a stocks and shares ISA. Okay. We are going to talk you through the different options available to you. So we'll cover off things.

What's a robo advisor. Should I use one? What if you want to do it all yourself and how do you source the information to research the different funds you want to invest in? So we're going to share with you all the practical steps that you'll need to take, to be able to make that very first stocks and shares investment in an ISA.

Catherine: Welcome back to the women of money cafe. Hi there, Julie. Hello, you have myself, Catherine and Julie today, and we are giving you everything you need to know to begin your first ever stocks and shares investment in an ISA. So this is for you if you've been on the fence, you know, that you want to begin, investing.

 You're not quite sure how to do it, what to do, where to go, what to look at and what not to. So in this episode, I'm going to grill Julie and [00:02:00] she's going to break down those answers for you, into some easy steps. So that by the end of this episode, you can go away and begin your first ever stocks and shares ISA investment.

So I've built you up big there, Julie. So I'm hoping that you do have all, and I know that you've got all new answers. 

Julie: They're carefully filed away. They're not always instantly retrievable 

Catherine: well, we are recording. So I'll just hit pause. So it will appear retrievable. So this one is not, this is just me being super curious.

How long ago, Julie, did you open your first ever stocks and shares ISA? 

Julie: Now I know this because I think I've referenced this several times before in the women of man cafe. And it was back in 1999. I just not long starts in financial services, and I got that saving an investor was a good idea. So I thought I'll go get myself [00:03:00] one of those ISA things.

And because it was on all the billboards. It must be good. Right? Mm-hmm Aberdeen technology fund back in 1999 did not end well. 

Catherine: I think actually that is almost the perfect example of why episodes like today's are really important because it's not easy, but we can be led by an advert or by marketing or by things that other people have said that worked for them.

But we are going to add to that some of the things that we think you should listen and think about before actually picking one and if it's on a billboard, it's probably not the one. Do they even have billboards now? I mean, now we're in social media. If it's not in a little tiny post out there for you, it's probably because you should be looking at something else.

So, if I am going to pretend here, Julie, that I'm brand new I've [00:04:00] never invested in stocks and shares ISA, which obviously isn't true, but what would your first question be, to me be what should I really be thinking about before I even click open the account, and begin to buy that, ISA stocks and shares.

Julie: Okay. So if you think back to the other episodes of the women and money cafe, that you've listened to, you know, that we don't invest money without knowing what point of it is first of all. So being clear on what the purpose of the money is. So let's assume you listen to episode whatever number it was. Okay. No doubt Catherine will pull it up in a minute because she's a genius like that. So you know why your investment? So the next, the next first step is what's your timeframe. Okay. How long are you going to be invested? 

Catherine: Okay. So let's just say that my timeframe was two or three years. What would you be saying to me then?

Julie: The shop is shut. You can't have a stocks and shares ISA. 

Catherine: Right? [00:05:00] So too short, a timeframe. What should I be looking at? 

Julie: Okay. So the shop is shut is a metaphor by the. You can still go and do it. We don't think it's a good idea. So realistically, all the textbooks say that you should be looking at a timeframe of at least five years.

Okay. But getting clear on the timeframe might influence some of the next decisions that you need to make. So if you are investing for something that is in five years’ time, that might influence how much risk you're prepared to. As opposed to if it was something that you were investing for that had time frame of say 20 years.

Catherine: So by understanding how long I'm putting it aside, that's going to help me work out how much risk to take with it? Yes. Okay. Now I remember when I began my own ISA and cash fell super safe. But [00:06:00] obviously that's not going to generate us any growth, but I found this idea of risk quite off putting, I mean, even the word risk sounds like scary.

But it's not actually that scary is it. Can you just explain to me, as the beginner what we mean when we're talking about what our feelings toward risk are?

Julie: All right. I'm going to tell you what I tell all my clients when we have this conversation. Okay. In reality, the risk is not that we are going to lose all your money and it'll disappear for forever.

That's just not something that is likely to happen with the kind of investments that we work with when I'm talking about risk what I mean is that they will come a point in time, where you may want that money and it may not be worth as much as it was last week. okay. And then you have a choice. You either take the money out and you accept that drop in value or you wait.

So the [00:07:00] real risk is you have to wait for the money to come back up. The other thing I'll also tell people is it's not, it can go down in value. It will go down in value, right? You’re going in to stocks and shares investment. Okay. The value will go up and. it's definitely going down at some point. Okay. But it's definitely, it's going back up as well.

I've never known it, not go back up, but the real risk is time and 

Catherine: waiting 

 so, I mean, that goes back to the very first thing you've said is you shouldn't really be knowing you want this before five years. So that is to allow that time and it might still be that on the fifth here, it's down. But if it's a longer horizon, there's more chance it's going to rise back up.

And I think what I've always found strange is the people I talk to often worry that that value is going to go down, but it's the same with our house price. Isn't it. So whilst in recent memory, we haven't seen house prices go down dramatically. They have gone down and people just hold on. So if you're in a position where you [00:08:00] don't have to sell, whether it's your house or your investment, and you can wait longer then you'll ride through until the, until you're back in the black, so to speak. So, and I think that that risk, it needs to be put like that because there is also the risk of doing nothing isn't there of just leaving it in a cash ISA and that also carries a risk. Do you want to talk to us about that? 

Julie: Okay. We're in danger of sounding a bit miserable here. There are no risk-free options. no, because if you've got money sitting in the bank and let's say, inflation's going to run at 10%. And you shopped around and got yourself a stellar rate of one and half percent in the bank.

Your money's gone down by eight and a half percent each year, the buying power of it. So there are no risk-free options. So, but we're assuming if you're listening to this one, you are on the cusp of want to make your first investments. So you're cool with that. 

Catherine: Yeah. Okay. So [00:09:00] before we jump into the next thing on how to identify our risk and we are covering off that if you are about to make your first stocks and shares ISA that you do have cash in an emergency saving to use in the meantime.

So anything else to add on emergency savings? We've done an episode on this recently on how to build it up and there are differing opinions on how much you should have, but anything you want to say on that before we delve into risk a little bit more. 

Julie: No, let's just talk about how to do. 

Catherine: Okay. right. So how do I work out what my risk is then as a brand-new investor?

Right? So 

Julie: It's about playing the game in your head, this is really pessimistic, this bit. Actually it's about checking how comfortable you are with how much you can drop by. Okay. So it's looking at, right. So let's say it dropped by 10%. How do you feel about. [00:10:00] I don't like it, but I can handle it.

I'd say it drops by 20%. Mm that's alright. It drops by 50%. Okay. Now, I'm not comfortable. Right? So it's all about trying to figure out where your comfort level is with how much you can drop by, but there's a flip side to this risk. So it's the loss side, but the other flip side and risk is game because with more risk yes, there's more potential downside, but there's more potential upside. And if you don't take enough risk, then you're back to almost being in the bank where the money's not going to grow enough to be able to achieve what you wanted to achieve. 

Catherine: Okay. So if I was to go and begin this . I know that there's a couple of options, which I know you're going to go into.

Because when I talk to people, usually they say, oh, we think I'm a medium risk or I'm quite high risk or I'm quite cautious. Is that enough? Or would you be encouraging people to explore that [00:11:00]attitude to risk a little bit more? 

Julie: Oh, definitely explore it more. And one of the things, one place that I would start, if you are trying to figure this out for yourself is you will .

have heard us mentioned before the beam app. Yeah, so go and play beam. And identify what your strengths and what your weaknesses are when it comes to just overall attitude towards investment. 

Catherine: Yeah, that's the only finance app that I got my husband even slightly interested in. He absolutely loves it and he's not into money at all, but he found it fascinating. I think it's the insight on yourself isn't it. And then you can start to apply that. So, yeah, I'd forgotten about that. So thanks for reminding me of that. Okay. Right. I've got some money and I want to put it into an ISA. Tell me what I'm going to do now.

Julie: Okay. So your next steps, what you need to do is ask yourself, do you want to be hands on or hands off? Do you want to get stuck into [00:12:00] this, understand it, play around with it, or do you just want the money invested so it makes money, so you don't actually have to do anything. 

Catherine: Okay. I know which one I'm leaning toward but I think we, in fairness for everyone, we should probably cover off both.

So should we do hands off first? Because that might be a shorter explanation. So I'm guessing you are talking along the lines of robo advice, investment apps, or kind of ready, made portfolios, which are, are built for us in the first instance. And I pick, choose, and walk away. 

Julie: Yeah. Okay. So you've got, you've got three options on how you approach this, right?

So you can either get an advisor to do it for you, or you can get a robot to do it for you, which sounds sexier than as, or you can DIY. So if you come to an advisor, the benefit there is that we are going to do everything for you. We take responsibility and you are protected to the hilt, and you don't have to lift a finger.

But we cost money. [00:13:00] Yeah. So if you are not wanting to get involved with the advisor. Okay. So next step is if you're wanting to be relatively hands off, I think go and have a look at the robot vice offer like that. And when we say a robo it's not like some little robots go and do it.

I'm afraid it's an algorithm. So you've got lots of apps out there that will do this for you. And what they do is they ask you a series of questions. So they'll maybe ask you about experience that you've got when it comes to money and investments. They'll ask you about your timeframe. They'll probably do a risk assessment on you as well.

And they might ask you about any sort of ESG or ethical biases that you have, and then it takes all this information and then it spits out an answer. That'll go like, okay, you want the balanced portfolio? And here it is, and it's a pre-built portfolio that is built to be in [00:14:00] line with your comfort levels around investment and risk.

Yeah. Is this making sense so 

Catherine: far? It's making perfect sense. And I think certainly as an absolute beginner, knowing me would lean toward that in that it's taken an element of getting to know me in terms of how long I'm investing for some of the things are important to me and helping me select that risk on my low, medium, high.

In whatever words it uses and put making a suggestion, is it, can we use the word recommendation, I guess we can, to say that this might fit you and then I'm trusting the research that's already been done. So I think it's a starting point. It's possibly a really good point. And I would lean toward it obvious.

Some people are going to prefer the DIY route. So should we go cover off some of the pros and cons of those before how to go about doing each of those. All right. Well, we cover off the pros and cons of DIY. Tell us about the DIY option. 

Julie: [00:15:00] Okay. So DIY is, you're going to do it yourself. Okay. So let's say you're like this stuff's really interesting and I'm right into it.

And I want to understand more. So what you want to do is you want to get yourself one of those investment platforms, things many are available. You've got Hargreaves landsdown you've got AJ bell; you've got interactive investor. You've got Vanguard, which is a little bit different to them because you can only buy Vanguard stuff in Vanguard, but the other ones, you can buy everything in there.

You've heard Catherine refer to it before as a supermarket. So it's like an investment supermarket and you can go in and buy anything that you want. So the upside of the DIY route is you have complete control and so much choice. Because with the robo, it's spitting out the answer and it says here you can have that one.

and you can tweak it sometimes, but you're getting this, whether you like it or not. So with the DIY route, you have complete control and the benefits [00:16:00] are there, especially for the likes of yourself Catherine knowing how you feel about certain industries, certain manufacturers, certain companies you can screen for things like that.

But the downside is you are going to have to do all the work. So you need to figure out what your asset allocation is. I'll explain what that is in a minute. Then you need to figure out what you're actually going to invest in, and you're going to have to do the research.

Well, we have a lot of fun running the cafe. The reason we do it is to reach as many women as possible to empower them around money. So if you know, a woman who would benefit from feeling financially empower. You can help them and us by sharing this episode with them.

Catherine: Okay. So let's say that I found a little bit more confidence whilst the robo advisor sounded like a neat option that I could maybe benefit from quickly. Let's say that maybe I've started there and now I'm feeling a bit more confident. If I'm doing all that work, where am I going to find those kind of [00:17:00] answers?

Where am I going to go to find out about the funds and the bits that I'm meant to be doing in this DIYing? 

Julie: Okay. So before we get to funds, what you want to do is you need to figure out your asset allocation. Okay. Because in some ways that's, I can't remember the research, but we all know it. The asset allocation is actually the thing that drives your investment returns, not the funds that you pick.

Oddly enough. Okay. So when I say asset allocation, so if you picture a pie and the pie has slices, and we've got an equity slice to the pie, we've got a bond slice to the pie might have a property slice to the pie, commodities, cash, and it's how you cut this slices of the pie that determines the risk of your portfolio.

 So if you've got 90% in bonds and 10% in equities, that's a very low risk pie. You've 

Catherine: got. okay. And if I'm feeling more high risk investing for the longer, then I'm going to want a bigger piece [00:18:00] of equities in my pie and a smaller piece of, of bonds. Okay. And just to reassure, anyone's listening, that's already done in your robo portfolios, so that the one they recommended.

We'll have a portion of equities, a portion of bonds, cash, maybe some property to match your risk. And that's kind of where they naturally correlate. Isn't it? The higher risk you want or the bigger reward, the more you're likely to have in equities. So you don't have to worry about it with the robo part, but when you are building your own or selecting a fund, like Julie says, focus on, well, what's my asset allocation is to Make sure that matches your risk. Okay. So how have I found that out? Where would I go to find that out? 

Julie: I don't know if I'm meant to say this, but you know, if it was me, what I would do 

Catherine: I think you were allowed to say what you would do. okay. 

Julie: What I would do if I was trying to figure out asset allocation for the first time, there's broadly [00:19:00] kind of 

two options you could look at, because I'm going to go and steal someone else's asset allocation is what I'm going to do, right? So you've got the Vanguard life strategy, 100% fund or 60 or 80 or whatever the heck. Right. And that if you go and look inside, one of them, that's going to give you your asset allocation that you can copy.

Catherine: okay. Well, the hundreds already telling me asset allocation, it's a hundred percent.

Julie: But hang on. So if you, if we take the 100 as an example, so Vanguard life strategy, 100%, this is not a recommendation. This is a fund. If you go and Google it, you'll bring up the fund fact sheet and you can see how they've cut the pie up inside.

So let's say they've got 30% UK equities, they've got 10% European equities and so on and so forth. All right. If you go and get the Vanguard global world all cap fund, which is a similar risk to the life [00:20:00] strategy 100 fund. You'll see the way they've cut the pie up inside. They're slightly different and they've got more of a waiting to the US than the UK.

Okay. So if you go in, go, and look at the other funds that are point and shoot and I'll explain point and shoot in a bit. Okay. You can see the asset allocation inside them. And the only thing that people tend to disagree on is whether they want to be more weighted to the UK, or if they want to be more weighted to the US.

That's personal 

Catherine: opinion. It is. And I might just go back to the Beam app that there, if you are in the UK, you may have a natural bias toward having more UK because you are UK and it's, it feels familiar. But it may not be they, it may not be the good enough reason. No, that looks familiar. I'll go with that.

Okay. So I'm just going to backtrack a little bit just to make sure that I haven't got lost on the way here. So I've decided that perhaps I'm not going to do the robo advice for whatever reasons. I'm DIYing. So I've got a [00:21:00] platform of which there are many, and you've named a few. I know I'm putting it into an ISA.

I've done some research. I'm going for a long time. So I'm feeling relatively high, medium risk. So 80% equities. Why can't I just have a point and shoot or can I 

Julie: oh yeah, we like point and shoot. Okay. So a point and shoot fund. I don't know if that's a proper technical term, it's like just built and it's ready.

And someone's made the pie already for. Yeah. So, you know, you'll go out and you will maybe see somebody's multi-asset passive balanced portfolio. That's a lot of bloody words, right. But that is a point in shoot fund for somebody that's middle of the road when it comes to investment risk. So there's lots of these things right there.

Every man and his dog have brought one to market since [00:22:00] 2013. I won't bore you, with the reasons why. So, the supermarkets are awash with these things. So you can just go and buy one of them. Mm. And then if you want to sex it up a little bit, what we do is we could have what we call a core and satellite approach.

So the core is going to be your point and shoot fund. So it could be something like Vanguard or any other provider out there. And that's when maybe you'd have the bulk of your money. So maybe 80% of it would go in there. and then if you were getting really interested or you've got things that you feel really passionate about, you could take the other 20% and you could have little satellite funds dotted around your core that are all into things that you are right into.

So one example is if you look at Pictet as a fund group, they've got all kinds of weird and wacky. So if you want to sex up a bit, so the core is the thing that is going to make you the money and is [00:23:00]not going to go wrong. because when we start trying to pick lots of different stuff ourselves, that's when we balls it up.

So you want some big stable and boring in the middle and if you feel the need to get a little bit exciting, that's when usually little your satellite approach. 

Catherine: Yeah. Not heard it as a core and satellite. I've I guess I call it my sandbox. It's almost like here's the bulk of my sensible investing. That's in some funds that are already

multi-asset will match my risk where the fund manager has gone and done all the hard work for me. And then I play in my sandbox with the little bit that I'm perhaps more willing to lose, I guess, in the same way that I might take a hundred pound out for a day out that if it's gone, it's gone.

It's not such a risk for me. And that's how I’ve covered Oliver's junior ISA before. And he did pick for his little sandbox based three of the pictet tape funds based on he thinks water, [00:24:00] ecology and another one technology when he looks to the future. So that was his element of playing.

But alongside that, he's got a couple of very steady stable, broadly diversified. We've not used the word diversification in the whole of this episode yet. Very broadly diversified funds. So core and satellite suppose exactly the same as my main part and my sandbox. So okay. So I have a .

 Slight preference for point and shoot funds, but that's not the word. If you Google point shoot funds, I'm not sure you're actually going to get anything. The technical name is multi-asset funds. Risk rated multi-asset funds. Okay. Now with a risk rated multi-asset fund, can you just cover off for me the difference again, between passive and active managed.

If I was picking. 

Julie: so you get two [00:25:00] styles of investment management, and one is called passive, also known as tracker and the other is active. So with a passive / tracker fund, what it's going to do is it's oh, we're going back to the black box against a robot. it's going to track the index of whatever it is.

So if you go and buy a FTSE 100 fund tracker. This is a passive fund because it just, it buys and sell things passively. It just, if it's in the 100, it's buying it. If wants the S and P 500, you're buying all of the S and P 500, and it buys all the indices around the world. And. It doesn't react to market conditions or sentiment or momentum.

It's not going to sit there and go all of a sudden, oh, we don't fancy holding this. We're going to sell it for that. It can't, it has to hold everything that's in the index. Okay. The flip side of that is you can have an [00:26:00] active manager and this is where someone is sitting there and making judgment calls and assessments of right. Okay. Well, I don't like that company. I do like this company; we're going to sell out this and we're going to buy that. 

Catherine: okay. So one is following that's its decision, the passive, and that's what it's going to, to track effectively the index that it's named at outset. And that sounds cheaper to me. And then the other one there's humans involved who are making decisions along the way and keeping movement buying and selling in the assets or the equities that, that make up that. So when we hear those terms, passive and active, they're effectively just a strategy for managing a fund. because I see often, and this is not a recommendation at all.

In fact, what I'm trying to say is if you see it, don't believe it's a recommendation that it's now become the answer that everywhere you go on social media TikTok just says, invest in a tracker, invest in an ETF, invest in a passive. But without all of the thinking that you've talked us through [00:27:00] today so it's got pros and cons the other one's got pros and cons, but just because someone's told you, it is the answer doesn't mean it is the.

I like a bit of both, because I think it's going back to diversifying, isn't it? That one might do one thing. One might do another. So have you got a preference, or do you like to mix them up? 

Julie: I like maths. I like the numbers because it's one of those quite polarizing arguments. That one is good, and one is bad.

Okay. Unfortunately, the data does not look good for the active managers. Okay. Because you are paying them more and they're meant to beat the index and they fail miserably to do it often. So looking at the data, you are better off going passive, but caveat here. Okay. There are some asset classes and some sectors where an active fund manager will outperform the index on a fairly regular basis.

The bulk of them, they can't. All [00:28:00] right. So if you take like the US or the UK, they can't consistently beat the index, but if you go into like a different subclass, so let's say you wanted to invest in UK smaller companies, an active manager can probably if you get a good one, can probably beat the index consistently.

Okay. 

Catherine: I still think a little bit, a little mix and match still allows for all of, but it's less, it sounds less random the way you described it. So maybe for some things there's a passive argument and for others, there's a more active argument. Okay. So I know why I'm investing in terms of a checklist.

Then I've got my cash savings. I know why I'm investing. So this money I'm putting aside for more than five years, for a specific reason, I've got a purpose attached to it. I've looked into, do I want to go down the advice route, the robo advice route or the [00:29:00] DIY route. So I'm going to make, I'm imagining this in my head as a decision tree.

If I've gone down the robo advice route, there are plenty out there. I'm going to just put here actually a good place for research for all platforms, including robo advice. Compare the platform. And it tells you all the costs and you put in an imaginary amount that you want to save, and it will tell you and give you a direct comparison of which ones are worth looking at.

So that is part of the research that you could do maybe to help decide or you can go down the platform, DIY route could still use, compare the platform to choose your platform on that one. And then it's going to be roll your sleeves up and actually get really involved in finding out what you need to know about your risk, the funds, how they're made up and their asset allocation.

Have I missed anything in that recap that I've just done there? No, 

Julie: I think that was fairly comprehensive. The only thing I would throw in is if you're a robo person you can do it from as little as a [00:30:00] £1. So you can start really small. So I throw that in. It's so accessible. 

Catherine: and I think that lends itself to, you know, if you're doing something from a pound that we've covered this in all of the savings ones before, as this idea of do small, and this is a consistent thing, it's not just take a chunk of money and stick it in and hope that what you want to be doing is regularly consistently investing on an ongoing basis.

So if you start with a pound and get more confident and increase to 10 pound, a hundred pound or whatever it is that you've got available, that you are willing to put toward that purpose. I suspect that you've got a list there of I want to be robo, give me some names of these are not recommendations, but things you could consider.

All 

Julie: right. People, this is where you want to time stamp. Okay. Because I'm going to rattle through a list of the Robos. Okay. We have got nutmeg. We've got Wealthify. We've got money. Farm. We've got plum. We've got [00:31:00] wombat. We've got doddle. We've got free trading. We've got trading 212. Cool. I may 

Catherine: miss some, yeah.

Can I just add climb8, for those who want the sustainable and compare the platform, we'll have them on for all their prices costs and minimum investments as well. So that is in your show notes. Okay. So a little bit more, I think by the sounds of beginning being a beginner, that the DIY is probably the one that you need to know more on. So let's say I've now committed. I'm doing the DIY route. Help me out, Julie, what am I now going to do as soon as this episode finishes? 

Okay. 

Julie: So did you hear me loud and clear when I said it's the asset allocation? that will determine how much money you make.

Okay. It is not the funds deciding. It’s  how much am I going to put in UK stocks? How much I'm going to put in US. So that's the bit that determines how much money you're going to make. Okay. But then we need to figure out, okay. We've decided that we need to put X in UK equities. How [00:32:00]the hell am I going to find a fund that does.

Is that a reasonable question 

Catherine: that might be on your mind? Yeah, I was kind of thinking there's a lot of how, like how so let's say that's what I'm looking for. Where am I going to find out? How am I going to do that? 

Julie: Okay. Don't look on billboards. or TikTok or taxis, put them on taxis. Okay. So step one, ignore marketing.

Okay. Right. Because that's what suckered me back in 19, whatever it was. So you, you want to do DIY and you've committed to put some effort into this. So you want a reliable source of objective data, which unfortunately is not exciting, and it isn't sexy, and it isn't a great story. It's just numbers. Okay.

So the places I would go to for that is I would either go to Morningstar as a website or trust net. Okay. You go to these websites, and you can start to [00:33:00] filter and search the fund universe. So let's say that you were looking for UK company funds, so you can just go into the drop-down box, select that, and then it'll start giving you a big list of all the funds that live in that sector.

If you like. Yeah. Okay. At which point you're probably looking at the screen thinking  what? 

Catherine: Yeah. Because there's a long list. It's a very long list. Can I, if I'm doing that filtering things, that's effectively what I'm doing. I'm going to. Filter down and go for a list and then click on that and get more information with some pictures, not just numbers on the, the asset allocation and where my investments are.

Can I filter by things like, is it passive? Is it active or is it a hundred percent equities or is it can I even by risk, what sort of filters can I apply to. Help me reduce, eliminate the funds that are not matching me. Okay. You're 

Julie: not actually going to get that many filters to help narrow down [00:34:00] for you.

Okay. I'm really sorry. I have lots of filters because I have the big, expensive version, but you are accessing this for free. So I think it's just, first of all, knowing roughly what part of your pie you're looking to populate now? I suspect that let's say we're going to trust net. You've put in UK companies, and it brings up this big, long list and it'll have columns of numbers.

And I know that you are tempted to go to the one-year performance figure and click sort so that it brings up the best performing figure performance figures over one year. You're like, I'll have that. No, we don't do that. Okay. So what I would do if I didn't have access to the tools I have, I would maybe sort by three and five years, that would be an option.

Because we want long term performance, but it's not really the performance I'm going to look at. Okay. So the first thing that I always do when I'm [00:35:00] researching a fund is I always look, there's a ratio called the sharp ratio. So I always want to know where to fund sharp ratios is before it'll entertain investing in it.

So it has to have a track record minimum of three years. Okay. I'll be checking, so when you click into the fund, who's managing it, and have they been managing it for that time period? Because if the three and the five-year stats are stacking up really nicely, but turns out, they changed the fund manager last month.

That's going to be a question mark for me. 

Catherine: Well, yeah, because arguably the performance that you've seen was based on the other person and that might be about to change. Okay. I'm just wondering if this is the episode to talk a little bit more about sharp ratio or shall we leave extra details and almost do like we did with the pension jargon, a bit of investment jargon on another occasion, 

Julie: Catherine, they don't want a whole episode on sharp.

Do you.[00:36:00]

Catherine: No, no. 

Julie: So should I see if I can do it in a sentence? Go for it. Okay. Sharp is a ratio. So what it does is it figures out how good that fund manager was at making money when taking risk. So, who is the best at getting the most return for the smallest amount of risk? 

Catherine: Right. So this is going back to when we take higher risk, we have the potential of higher reward, so two funds could have taken equal risk or had the same amount of reward, but one took more risk in order to get it. Yeah. Okay. Alright, so it's

Julie: telling me, you can look at the performance figures, that tells you how much it made, but what the sharp does It tells you how they did it. 

Catherine: And are you looking for a positive, a negative, a small, or. You 

Julie: want, you want a positive one? If it's negative run for the Hills. Okay. The higher, the positive number, the better. 

Catherine: Okay. I want a big positive, sharp. 

Julie: Okay. the other number that I [00:37:00] keep an eye out on, that's going to help you when you're sorting through trust net is the volatility number.

So it'll have a volatility number. The bigger that number is the more interesting the ride's going to be in the fund. 

Catherine: So if it was a rollercoaster, this is how many ups and how many downs, 

Julie: something with a volatility figure of eight versus something with a volatility of 80. Right? The 80 is like scary. That is like one mega rollercoaster.

Okay. Whereas the one that eight is like the teacups. 

Catherine: Right? Okay. I'm somewhere in between, I'm going to Alton towers at the weekend. So I'll let you know, in our next episode, whether I'm teacups or nemesis. Okay. So in terms of DIYing I'm on Trustnet or Morningstar, I've got some tools to filter, to find out what I need for a little bit more fund information.

I'm looking for long term performance and another short figures. And I'm kind of interested in these two new. concepts of [00:38:00] sharp ratio and volatility. Or I'm just looking as I'm going through this trustnet for some funds that are going back to this idea of just ready, made funds point and shoot, which is not what they're called.

Reminder, Julie, what we're looking for those 

Julie: you want a multi-asset portfolio. Okay. So they will sometimes be called like a balanced fund, a cautious fund, a manager of manager, or a fund of funds. There's a whole host of names for them out there, but as you're sifting through, you'll start to get a feel for it.

But now that I've mentioned manager of managers, there is there's one really, really important thing that you want to keep an eye on when you're picking your funds. right. Arguably more than the performance, more than the sharp. the charges. Yeah. Right? Yeah.

Performance. We haven't got a bloody clue. What's going to happen next. That's a guess. Right? The charges are the one thing that you [00:39:00] can control. You do not want to be paying any more than you have to for something. so the charges are how much you're paying that manager or that fund group to manage your money for you.

So if you're going with something that's a passive portfolio, you're going to be paying anywhere in the region of say between 0.4 to 0.5. Okay. Point five max. 

Catherine: Right. So, yeah. So just to recap, this is coming out of your money that you are investing. So you've put a hundred pound in a month or one pound.

And then there is a charge. So we've got a platform charge. And what Julie's talking about now is also a fund charge. Yeah. So I'm guessing from how you phrased that, but the active funds are more expensive. They are

Julie: because you're paying someone there's, it's not a robot anymore. It's a person. And I, the phrase I use there as a manager of managers, so sometimes you'll get, so let's say you've got Joe blogs that manages the UK equity income fund.

So Joe needs to get paid for managing the fund. Then you've [00:40:00] got Jane who picks lots of different UK equity income funds. so she's actually put Joe in her thing. So she's got a fund made up of lots of different funds. That's a manager of manager or a fund of funds. So there are two people there that need paying.

there’s Joe and this James, so that's extra charges. That's all, they're making lots of money and that they're good at what they're doing. 

Catherine: So okay. And again, I think with the on compare, the platform, it'll tell you what the platform charges are, but you need to be using some of those tools like Morningstar or trust net and going into the fact sheets and having a look at what the fund charges are.

If you are in the DIY camp. The robo advice will have a charge, but then it should be showing you that at the point that you enter if it's transparent, which it ought to be it tells you what it's going to be costing you to go in. And I think the, the thing on cost is it's important in that you don't need to be paying more than you have to, but it is [00:41:00] worth.

making that cost because you're now getting access to potential growth in a stocks and shares ISA that if you weren't paying those costs at all, you wouldn't be benefiting from that potential for it to fall and it to recover and to grow. So the costs are worth spending, but you know, if you can get the same performance from one that costs less, then that's going to be a better one for you.

You've got more of your pennies and pounds left in your investment. okay. So we're coming to the end of the episode. So any last-minute pointers for those who are listening, who are going to at the end of this, go and do their research and invest their first pound 10 pound, a hundred pound into their first stocks and shares.

Julie: Stick with it and be realistic. Yeah, brilliant. It will go down, but it will go back up as again as well. You are not going to be getting 30 and 40, 50% returns. Okay. Be realistic depending on where you are sitting [00:42:00] on the whole. Risk spectrum, you know, we should be averaging either sort of between 4% and 9%, depending on how much risk you're taking.

Nobody ever says these numbers to you. Right? So if you're at the lower end of the spectrum, you're looking, you're looking to average about 4%. Okay. If you're at the other end, you want to be average in about 9%. 

Catherine: So which compared to what it's getting in the bank at nor 0.4. And you are doing this for a long term five years plus I think my, my piece of advice would be just to start.

I think whether you choose any of the options, whether you've gone robo point and shoot DIY just to have exposure access to consistently add the small numbers up and become more familiar so that confidence and familiarity and knowledge grows as you do that. So it's not like you've got to wait until you feel a hundred percent confident that you know, everything and then begin, just [00:43:00] start small.

As Julie said, stick with it, be realistic and consistently, consistently do that. And over time, you'll start to see the rewards. Perfect. Thank you so much, Julie, please. If you are listening and this has inspired you to go and put your first one pound 10 pound or a hundred into stocks and shares ISA, or you've got any questions at all, you just teetering on the edge and just need that.

was going to say nudge, but probably hug to get over the line, then drop Julie and I and email at their hello women. Cafe email. And we'd love to hear from you. Thank you very much, Julie. 

Julie: Right. Thank you, Catherine.

Thanks for listening to the women and money cafe with Julie fly and Catherine Thomas Humphreys. Well, we have a lot of fun running the cafe. The reason we do it is to reach as many women as possible to empower them around money. So if you know, women who would benefit from feeling financially empowered, you can help them, us by sharing the show with them.[00:44:00]

And there's nothing. We have more than hearing about the changes you've made seriously. It's what makes this all worthwhile for us. So please drop us a voice note and share. You can contact us. hello@womenandmoney.cafe. You've just been listened to our financial chat, but please know none of this constitutes personal financial advice.

Please reach out to one of us or any of the other fantastic financial advisors in the UK for that kind of help.