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In the first part of a new Money Talks series, Matt Falla and Ian Leverington of Evelyn Partners, who know a thing or two about investment, sat down with Meg Winton who picked their brains about how to start in this area
INVESTMENTS – should you, shouldn’t you, what’s best, what should you avoid?
They are all questions anyone who is considering investing will ask themselves.
Being well-informed was the foundation to making sensible investments, said Matt Falla, managing partner, and Ian Leverington, investment director, at Evelyn Partners, so knowing where to look, what to avoid and what is reputable is essential.
Investing, as Matt described, was “any-thing other than holding on to cash”, whether that be in the bank or in your pocket.
“It involves allocating that cash to something that is of a higher risk than cash, or that you have to lock away for a longer time than cash, so you would expect to receive a higher return for taking more risk or restricting access.”
“You’re taking near-term risks for long-term return,” Ian added.
Why people choose to invest is often down to the effect that inflation has on cash over time, in that it “erodes the buying power” of the pound in your pocket.
To demonstrate the extent to which that can happen, Matt shared a real-life example.
“Before I was born, my parents were looking at buying a house in Jersey; I think it was a shade under £6,000,” he said. “They didn’t buy it, but now that property would probably be somewhere closer to £2m. If they had put that £6,000 under the bed and pulled it out 50 years later, it would probably get them half of a small car compared to a very nice house.”
Ian said investing was a way to make sure you had got enough money to “do what you want to do when you want to do it”.
“If you leave your money in cash, the chances are that you will not have enough money at the end of your time horizon to look after yourself in retirement,” he explained.
Investing was not without its misconceptions, some of which held weight, Ian and Matt said.
“People who aren’t familiar with investing automatically think that they can lose all their money, and you can, if you put it all on black,” said Ian.
“It’s why you go to an investment manager or do your own investment on the basis that you don’t put all your eggs into one basket.”
Matt agreed and said people could view investing as a “quick way to either lose a lot of money or make a lot of money”.
He also pointed out that people may feel they lacked the experience to make investments, but that there were professionals, such as him and Ian that can “take that responsibility for you”.
“I think there is an innate preference in some people’s minds between investing in the tangible things, like property, as opposed to the intangible stocks, shares and bonds,” he added.
“They all have their pluses and their minuses, but we tend to look at things quite differently regarding physical property and a stock and share portfolio.”
In terms of what to avoid when investing, the age-old phrase, “if it looks too good to be true, it probably is”, could be applied.
“If returns look too good for the risk you’re being told you’re taking, then there’s probably something wrong with it,” said Ian. “Avoid it like the plague.”
As well as avoiding short-term decisions, Matt did not recommend investing in something people did not understand. Ensuring clients are well-informed about their investment decisions is a key part of the roles he and Ian carry out.
“As professionals, we go to great lengths to ensure they understand what their investment is, how it performs and why we we’re including it in the portfolio,” he explained. “Any reputable investment manager should do the same.”
Risk, the men said, was an inherent part of investing, and Matt and Ian added that people must be aware of, and content with, that when making an investment.
The level of risk people were prepared to take, Matt said, was “proportionately linked to how much money you may lose in any 12-month period”.
I think there is an innate preference in some people’s minds between investing in the tangible things, like property, as opposed to the intangible stocks, shares and bonds
Matt Falla, Evelyn Partners
It’s why Matt said it was important to find out his clients’ attitude for risk.
“We’re looking at their capacity for loss,” he said. “How much could they afford to lose in the short term for longer-term gains?
“We’re also making sure that somebody’s time horizon is long enough to weather those storms and the ups and downs of the financial markets, and they’re going to feel comfortable if they look at their portfolio and see that it is 10% down.”
Matt and Ian said they worked to minimise losses for their clients by looking after a “diversified portfolio”.
“We look across different companies, geographies, sectors and timeframes,” Matt explained. “If any investments were to go sour, the impact on the total portfolio is far reduced compared to picking a stock and putting everything into it.”
He added that no one felt “truly comfortable” with seeing a loss but knowing that it was part of the journey towards “longer, more consistent returns” was key.
Knowing what was reputable when beginning an investment journey could be challenging, as much of the process was subjective and opinion-based, Matt and Ian pointed out.
If individuals are going it alone, Matt recommended dedicating time into researching the investment so each person could come to an informed conclusion about its safety.
If a person chooses to consult a professional, it must be one that they trust.
“That trust can be based on the personal relationship you have with that individual, the jurisdiction they operate in or the strength of their regulator and the regulatory environment,” he shared.
Ian acknowledged that it could be hard to identify a reputable investment, but said there were ways to mitigate the risk when choosing.
“If you’re investing in stocks and shares, you have a certain level of comfort that those companies are controlled on a central index,” he explained.
“They’ve got to comply with certain rules beyond an index, so you have some inbuilt defence.”
Diversifying investments and knowing your risk tolerance, Ian re-emphasised, should be key elements in decision-making.
“If you can diversify well and within each little investment, take a lot of risk, you can maybe reduce your risk, but understand what your level of comfort is.”
“No investment is worth laying awake at night thinking about,” Matt added.
If, after reading this, you have decided you want to invest, you’ve done your research or contacted a professional, and you are ready to embark on your journey, how should you go about it?
Ian and Matt’s top tips
Matt said that at the start of your journey, you should decide what you believe a good return on your investment would be for that year.
“Write it down somewhere, stick it in a cupboard and then pull it out at the end of the year and see whether the portfolio has done that,” he added. “It’s amazing how our expectations will alter by the colour the FTSE 100, or how another market is doing on a particular day.”
Ian agreed and advised against “watching the markets”.
“Don’t get an app which tells you what the 100 index is doing every five minutes,” he said. “Volatility is part of investing – markets go up and down.”
When you have made your investment, Ian said the best thing to do was “not touch it”.
“Leave it there to grow over the long term – don’t keep taking money out of it.”
When it comes to timing your investment, Matt quoted a Chinese proverb: “The best time to plant a tree is 20 years ago, and the second-best time is today.
“The sooner you can start investing, whether it be into a pension or a regular savings scheme, the better.
“Little and often is a fantastic way to go, because the beauty of investing is the effect of compounded returns,” Matt added.
Their final piece of advice echoed what was a clear theme of the discussion: Make sure you diversify your investments
Hear more
To listen to the full episode of Evelyn Partners’ Investment For Beginners Money Talks podcast, scan the QR code below.
