Too Old To Start Investing? Not If You Do This

this question gets brought up a lot and let me just start by saying that it's never too late to start investing in my view but there are a few more things that you need to think about both good and bad in order to give yourself the best chance to succeed so in this video I'm going to run through what I do to start investing how I choose the right Investments and some of the best ways to make the most of whatever time you have now whether you're a high earner or more toward the average I

think there are plenty of options so let's get started straight away first from how we're going to get this thing built in the first place so step one we need to choose what we're going to invest in and work out what our portfolio is going to look like now this can get complicated very quickly and lots of people out there will try and convince you that you need to have about 50 different things in your portfolio and make it look like some Frankenstein monster but I think in reality you don't need to bother with most

of that now in my view I think that what you invest in won't look a whole lot different whether you're 25 or 55 if you still want to invest for the long term and if you look at all of the things you can invest in there's only only really one game in town from my perspective and that's stocks or equities as they're often referred to the reason for this is that over the long term the global stock market has a long track record of results and nothing really else comes close sure you could invest in

property if you want to go down that route as well but even bricks and mortar haven't outpaced the stock market and things like bonds or even gold Don't Come Close either sorry and certainly you premium bonds won't get anywhere near it so if we go with the stock market this leads us with tens of thousands of companies to choose from so sit back relax and we're going to go through every one of them over the next 30 hours that was a joke by the way there's a much better way to do this which has nothing

to do with picking stocks instead we'll just own almost all of them together in one simple investment here's where our friend and my best friend the index fund comes in without going into loads of detail which I've done in other videos an index fund lets you own lots of companies together in one simple investment some index funds have thousands of companies inside of them and others have a lot less and there are a lot more details worth looking into but generally if you choose a global one or any kind of broad passive Index Fund you'll

be starting in a great place also you'll often hear about an index like the S&P 500 well this can also be bought by using an index fund as well but I'll leave that one to one side for now as we got a lot more to get through you can get as simple or as complicated with the Investments as you like but as a general rule of thumb here would be my own kind of personal tips you keep them as low cost as possible you stick to them being passively invested meaning that they just follow the

index based on how big a company is and finally you stick with it over the long run and don't keep changing things around the worst thing you can do and many people have done this in the past is they chase the stocks or Investments which have gone up recently because they assume that they just keep going up I guarantee that this sort of thinking will never change it's pretty much going to keep happening forever avoid this if you can right step two is making sure that we get the right set of accounts because investing at

any age is all about being as tax efficient as possible hopefully this is pretty obvious but the less money you end up paying in taxes on your Investments the more money that ends up with you that you can choose what to spend it on anyway also it's really important to take advantage of all the things you have available to you as an investor at any age but later on in life it's even more important now just before we jump into the accounts we use first up it's well worth saying that before you even think about

investing extra money it's well worth making sure that you're making the most of something like your pension at work so if possible just make sure that you're matching your pension contributions as high as they can go with your employer because this is quite literally free money that you could be throwing away for example if you could put in an extra £200 a month before taxing your salary then you can get your company to match that with an extra £200 well that's a 100% gain right there and not many Investments are going to be able to

do that every single month also because it's your pension you're not going to touch it for a long time meaning that you should be less likely to mess with it now this helps with what I mentioned ear earlier remember when I said that a lot of people try and Chase returns from what went up a lot recently well in a pension you're probably not going to look at it that often which should help as a quick side note please do find out what your workplace pensions are invested in and see if you might end up

doing far better by changing them to something better often the default funds people get put into which is the majority of the country by the way are extremely poor are expensive and have way too much money in things like bonds but again a whole another topic now with that done if you still have money left to invest that leaves us with two important accounts that we just talk about our stocks and shares Isa and our self-invested personal pensions these two accounts at any age are going to be able to help us to grow our investments

taxfree firstly the stocks and shares Isa is a completely taxfree investing account that you can open up with lots of different investment platforms now I keep the ones that I use in the description below if you do ever want to get yourself started they're down there to find the main benefits are you can put in up to £20,000 per tax year completely taxfree and then let that grow to any amount do bear in mind that the 20,000 limit is spread across all of your different Isa account so just be aware of that one in case

you do have other accounts open like a cash Isa for example and then your self-invested personal pension often called a sip is another great account that lets you invest up to £60,000 a year for most people that £60,000 is your annual limit which does include your workplace pension so be aware and the maximum you can put in can't exceed 100 % of your salary so for example if your salary was £40,000 and you paid in £4,000 to your workplace pension that would leave you £36,000 that you could contribute for that tax year into any other

pensions there are loads of other details but that could be saved for another video so please just do be aware of that now if that is something you do want be sure to let me know in the comments section below after the video now the key benefits of the Sip compared to the ISA is that your sip gets your tax claimed back for you when you contribute and put money in so any money you pay in into your sip it's like getting your tax back if that makes sense for example if you're paying £200 into

a sip you will get an additional £50 paid in from the government and this is done for you automatically by the Sip provider it will take a few weeks but it will get there eventually now higher rate and additional rate taxpayers can even get more but this does have to be claimed back via self assessment so it's probably worth checking this with your accountant or doing further research into this point for high earners clearly pensions are an extreme tax efficient way of investing so bear that one in mind and think about it as well as

making the most of your sip too now going back to the ISA there's no taxfree top up here but this is a completely taxfree account so you won't pay any capital gains tax or any dividend tax as your Investments grow over the long run and when you take money out whether that's in a few years or in a few weeks time there is nothing to pay at all whereas do remember that with a sip there is tax to pay on the way out depending on your total income although you do get $25 % of it

taxfree now how you decide to use an Isa or a sip is really up to you I'm not a financial advisor nor do I claim to be one there are pros and cons for each one and I did a video in more depth which you can check out on my channel afterwards okay investing time here's where we might want to consider our options and run some examples depending on how old you are and what kind of time scales you're going for at this point it's always worth saying that we have no idea what the future

holds when it comes to the stock market let alone any other kind of investment the next 10 20 or 30 years could be amazing they could suck or they could just end up being pretty average everything we invest today is not guaranteed to grow to any amount of money but if you do nothing we can guarantee that you will get nothing if anything by doing nothing you'll end up losing a lot of money to inflation but do bear in mind that you are putting your Capital At Risk so there's always that anyway here's where things

get interesting and I think we start to consider age as the factor if your investing time Horizon is 10 or 20 years until you want to use the money let's say you're in your 40s now and you like to start consider taking some cash maybe sometime in your 60s or even if you're 50 now and would like to start setting something up for your 70s you have a great amount of time let me just say that in fact let me just show you something that many regular viewers would have seen before so here's a few

bits of data showing how many positive years compared to negative years that we would have had in the stock market over 1 3 5 and 10year periods now as you can see the longer you invest for generally the greater the chance of a good outcome for example in any one-year period in the past you would have been positive 73% of the time as you can see right here but the moment you stick things out for a long run and move up to being an investor for 10 years the chances get better and better if you

focus now on this circle you'll see that 94% of 10-year periods were positive with just 6% being poor returns also if you are interested for anything longer the news just gets better and better in fact looking at really longterm term Returns the stock market has delivered more than 7% of real gains even after you adjust for inflation over the last 100 years or so this might not sound like a lot but let's just see what 7% can do for us if we invest different amounts of money also just before we do jump into this if

you are finding the video useful please do me a huge favor hit the like button and make sure you're subscribed too it does help out smaller channels like mine get to more people like you now on to the money so let's say £200 a month invested into a stocks and shares Isa for the next 20 years we pay in no matter what happens and we get an average return of 7% a year bear in mind that in the real world this would be a much crazier ride but we do need to start somewhere so whip

out the compound interest calculator and we get a figure of just over 00,000 remember that this is adjusting for inflation so that's 00,000 of real spending power just over half of that is for investing gains and you would have put in £48,000 which is not bad at all if you ask me for reference if you double that the return is doubled and obviously if you half it it's cut in half as another example if you are one of the lucky people who could max out a stocks and shares iser if you do put in £666

a month into your Investments for the next 20 years and you get those same returns you end up with £57,000 now that is very nice indeed just quickly if you want to see a 10-year return on the first example if you have a even shorter time scale it's £34,000 and this just shows the amazing power of investing if you can can stretch things out a little bit longer and push into the long term now there's no getting away from the fact that if you invest for longer you will have better Returns on average as you

would have been putting more money in but also benefiting from the effects of compound interest clearly if you were to start in your 30s compare to your 50s and put in the same amount of money you will do much better if you have an extra 10 or 20 years but I do think that starting older you might also have some advantages too first off your salary is likely to be higher than the younger person and therefore you might be able to save a bit more secondly I reckon that you're more likely to already have a

house and a lot more of the mortgage already paid off and probably lower monthly payments too and yes sure you probably have more dependence to worry about but I do think that you have some advantages here as well also let's just say that during your investing career you end up paying off your mortgage you could even use that money that you were paying into your mortgage to pay into your Investments which is not something a young person is going to be able to do so what you might lack in time you might be able to

make up for with money and being able to invest more money each month but don't forget to enjoy yourself along the way too that's something in my last video I spoke about and I think about more and more myself personally right now comes the spending part and the bit that I don't talk a lot about on most videos when we talk about investing if you're older and you want to start using these Investments how are you going to actually do it well as always there's never one simple answer but let me just give you some

ideas that I've also got to work out for myself over the next few decades first off let's just say that you're going to start using sub of your Investments in your 60s or at least before the state pension age let's say that you've got a combination of an Isa and a sip or some other pension at work you want to be careful not to spend all your money at once but also be as tax efficient as possible remember just like we mentioned earlier so assuming you're not working anymore here are some ways that you might

be able to do it firstly before we talk about drawing down our investments and selling anything I think it's important to say that we should have access to cash now this is a very personal thing but I think I'd like to have cash set aside to a couple of years worth of living cost as well as my investments remaining invested the whole time the last thing you want to do is have to sell all your Investments during a market crash after all like we said earlier there are no guarantees here that anything could happen saying

that though how will we take our investments and finally use them so first off remember that you will still get the full personal allowance which means right now you won't pay any tax on anything under 12,570 as is in the current tax year on top of that you won't have to pay tax on anything you take out of your Isa and you get 25% of the value of your pensions as tax-free cash to so technically the only thing you have to pay tax on will be anything you draw from the taxable part of your pension

hopefully that will make sense but let's just run a very very quick example say you want to make an income of £20,000 for the year you can easily make this completely taxfree you could take 12,570 from the taxable part of your pensions you might just sell off some of the invest investments in one go or do it monthly totally up to you so that's now the whole taxable part used and there's no income tax to pay then you can use the taxfree part of your pensions and your Isa to make up the rest of the

£ 7,430 and you can do that in whatever combination you like which will end you up within £20,000 for the year with zero income tax to pay now let's not forget that once you reach pension age and assuming it's still there and you qualify for the full amount you will get £1,600 a year which will be taxable income but then you can work out how you want to take the rest of your Investments across your pensions and your Isa in theory you could start to draw down less money during this time compared to what you

were taking before you get your state pension but I don't want to get too bogged down in this topic on this video because I think that needs a separate video to talk about entirely for example there's a general rule of thumb that says you can sell 4% of your Investments each year but I think in reality we have to be flexible and realistic depending on many factors definitely a topic for another video the the real point of this video was to show you that it's very possible and in fact definitely okay to start investing old

or whatever you might even consider old sure you don't get the same amount of time as if you're younger but then most people don't start investing when they're super young anyway and you can't go back so in my view stop focusing on what you can't do and get started as soon as possible you still have to deal with the risks we all do and there's no guarantee of the future we all have to deal with that one as well but we also have to deal with the fact that if we do nothing we also leave

ourselves open to our money just getting eaten Away by inflation I know what i' personally do but as always the decision is up to you now as I said earlier I've left out a ton of details in this video and if you're new to the channel or new to investing I've got load of videos on my channel to kind of help you along with that firstly if you're looking at what index funds you might want to invest in watch this video here and secondly if you want to know the differences between the ISA and the

Sip in a bit more detail watch this video here I'll see you in the next one happy investing