Which investment strategy is right for you?
There are numerous investment styles you can adopt that will influence where and how your money is...
Picture this: the year is 2030, we no longer have to wear a mask in the supermarket and can once again hug our relatives. Women will also possess two-thirds of America’s wealth.*
Over the next decade, an estimated $59 trillion* will have been passed on from Baby Boomers to Generation X and Millennials in the ‘Great Wealth Transfer’. 70% of this wealth will be inherited by women*. Sounds great, right girls? But at the same time, research shows that women are not only less likely to talk openly about money than men, but they’re less likely to invest their money to help it grow. Rock, meet hard place.
“Give a woman a dollar, and she can put it to good use. Teach her about how money really works, and she can change the world.” — Linda Davis Taylor, CEO of Clifford Swan Investment Counsellors
Back in the UK, the most recent figures from the Office of National Statistics shows individuals aged 34 or under opened 2.4 million ISA subscriptions (either cash ISAs or stocks & shares ISAs) in the 2017-2018 tax year**.
While slightly more young women than men subscribed to an ISA (1.29 million compared with 1.15 million), sadly the data shows that young women in the UK are also less likely to invest their money than men: the vast majority of women (1.2 million) opted for cash ISAs and just 85,000 stocks & shares ISAs**. This compares with 981,000 cash ISAs and 167,000 stocks and shares ISAs for the men**. Neither set of figures are exactly encouraging when it comes to long-term savings, but the men are once again ahead.
Why is this not encouraging? Because all the money pumped into the world’s economies to keep them afloat during the pandemic could lead to higher inflation. Not sure what that means for your finances and savings? I explain five different types of inflation and what it means for your wallet in our recent millennials video. If you’re looking for extra credit, I cover how to inflation-proof your investment portfolio in part two!
The basics of inflation eroding your cash is simple. If inflation is higher than your savings interest rate, your money is worth less over time. The amount looks the same, but it can buy you fewer goods and services. Here’s an example: if your cash ISA is paying you 1% (which is about average at the time of writing), and inflation is 3%, inflation is 2% higher than your interest rate. So goods and services are getting more expensive and your interest is not keeping up. £1,000 invested will have the buying power of just £942 in three years’ time. Over five years it will buy you £905 worth of goods.
Scottish Mortgage Investment Trust ironically, has nothing to do with mortgages and actually has a top ten full of familiar names, such as Amazon, Tesla, Spotify and Netflix^. The trust recently updated its policy to allow for more investments in unlisted, or private firms, giving investors access to companies earlier in their development. The trust has returned 243.78% over the past 5 years compared to a sector average of 72.77%^^.
Newly rated Guinness Global Innovators is all about finding innovative businesses which are changing the world in which we live. A mix of familiar names and the less well-known, the fund focuses on nine themes: advanced healthcare; artificial intelligence and big data; clean energy and sustainability; cloud computing; internet, media and entertainment; mobile technology and the internet of things; next generation consumer; payments and FinTech; robotics and automation. It has returned 120.58% over the past 5 years compared to 63.83% for its average peer^^.
If you’re like me, and putting your money into sustainable funds is important, BMO Responsible Global Equity could fit the bill. Manager Jamie Jenkins is extremely passionate when talking about sustainability and I like the fact that the fund invests in companies actively targeting the UN’s Sustainable Development Goals, while at the same time also engaging with companies where there are problems to be resolved. I appreciate the level of investor engagement and feel my money is going to good use making positive change. The fund has returned 101.23% over the past 5 years compared to a sector average of 63.83%^^.
As women are positioned to gain more financial autonomy, it’s important to ask questions and learn more. But whether you’re male or female, the big shift of money between generations requires knowledge. So, ask all the money questions and get the conversation started — this is exactly why FundCalibre’s millennial series was started. Use it as a resource. If you’re looking for somewhere to start, try our ‘Introduction to Investing’ five week course, week one starts here.
*Source: Bankrate, September 2018
**Source: Office of National Statistics, 2020
^Source: fund factsheet, 30 June 2020
^^Source: FE analytics, total returns in sterling, 5 Aug 2015 to 5 Aug 2020