Being a mom in the UK can be a challenging experience, especially when it comes to finances. Juggling childcare expenses, grocery bills, and household expenses can be tough. The average monthly budget for a household in the UK was approximately £2,907 (£34,886 per year) in the year 2022.
Although investing may seem like a distant dream it can be a great way to secure your financial future and build wealth over time. In this article, we’ll discuss how to start investing as a mom in the UK.
Why Should Moms Invest?
Investing is an excellent way for moms to build wealth over time. By investing, you can earn returns on your money and grow your wealth, providing a safety net for you and your family. It’s also a way to protect yourself against inflation, which can erode the value of your savings over time.
However, many moms shy away from investing because they feel it’s too risky or complicated. But with a little bit of knowledge and research, anyone can start investing and grow their wealth.
Types of Investments
Before you start investing, it’s important to understand the different types of investments available to you. Here are some common investment types:
Stocks
Stocks are ownership stakes in a company. When you buy a share of stock, you become a partial owner of that company. Stocks can offer potentially high returns, but they’re also riskier than other investment types.
Bonds
Bonds are debt securities that represent a loan made by an investor to a borrower, typically a company or government. Bonds can offer more stable returns than stocks but generally offer lower returns.
Funds
Funds are investment vehicles that pool money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other assets. Funds can offer a more diversified portfolio than buying individual stocks or bonds.
Property
Investing in property can offer potential returns through rental income and property appreciation. However, investing in property requires significant capital upfront, and there are also ongoing costs and risks involved.
Derivatives
Derivatives are financial instruments that derive their value from an underlying asset, such as stocks, bonds, or commodities. Derivatives can be used to hedge against risk or to speculate on the future price movements of an underlying asset.
Options
Options give the holder the right, but not the obligation, to buy or sell an underlying asset at a set price and time. Options can be used to hedge against price movements or to speculate on future price movements.
Futures
Futures are contracts that require the buyer to purchase an underlying asset at a set price and time in the future. Futures can be used to hedge against price movements or to speculate on future price movements.
Swaps
Swaps are contracts that allow parties to exchange cash flows based on different financial instruments. Swaps can be used to hedge against interest rate or currency fluctuations.
Choosing the Right Investment Platform
Once you understand the different types of investments, it’s time to choose a platform to invest with. There are many different investment platforms available in the UK, including traditional brokerage firms, robo-advisors, and online investment apps.
Here are some popular investment platforms in the UK:
Hargreaves Lansdown
Hargreaves Lansdown is a leading investment platform in the UK, offering a diverse range of financial products and services to investors. The platform offers a wide range of investments, including stocks, funds, investment trusts, bonds, and more. Hargreaves Lansdown also offers a range of investment accounts, such as ISAs, Junior ISAs, and SIPPs, making it easy for investors to manage their investments in one place.
While Hargreaves Lansdown offers a user-friendly app and website that provides access to a range of investment tools and research, fees can be a potential disadvantage for investors. The platform charges a range of fees, including account fees, dealing fees, and fund fees. This can add up over time and eat into investment returns.
Investors should also be aware that Hargreaves Lansdown does not offer commission-free ETFs, meaning that investors must pay dealing fees to buy and sell them. This can make investing in ETFs more expensive compared to other investment platforms that offer commission-free ETFs. As with any investment platform, investors should weigh the pros and cons and do their research before choosing an investment platform.
Nutmeg
Nutmeg is a robo-advisor that offers a simple, user-friendly platform for investors. The platform uses algorithms to invest in a diversified portfolio of stocks and bonds, making it easy for investors to get started with investing. Nutmeg also offers low fees, making it an attractive option for cost-conscious investors.
One of the main advantages of Nutmeg is the simplicity of its platform. Investors can easily set up an account and choose a portfolio based on their risk tolerance and investment goals. The platform also offers a range of educational resources, such as webinars and articles, to help investors make informed investment decisions.
While Nutmeg’s low fees are a potential advantage for investors, the platform’s investment options are more limited compared to other investment platforms. Nutmeg primarily invests in ETFs, meaning that investors may not have access to a wide range of individual stocks and bonds. This can limit investors’ ability to create a customized portfolio that meets their specific investment needs.
Overall, Nutmeg is a good option for investors looking for a simple, low-cost investment platform. While the platform’s investment options may be limited, the user-friendly platform and low fees make it an attractive option for cost-conscious investors. As with any investment platform, investors should do their research and weigh the pros and cons before choosing an investment platform.
Trading 212
Trading 212 is an online investment app that offers commission-free trading for stocks, ETFs, and cryptocurrencies. The app has a user-friendly interface and provides access to a range of investment tools and research, making it easy for investors to manage their investments on-the-go.
One of the main advantages of Trading 212 is its commission-free trading. Investors can buy and sell stocks, ETFs, and cryptocurrencies without incurring any fees, making it an attractive option for cost-conscious investors. The platform also offers a range of educational resources, such as articles and webinars, to help investors make informed investment decisions.
However, while Trading 212’s commission-free trading is a potential advantage for investors, the platform’s investment options may be limited compared to other investment platforms. The platform primarily offers stocks, ETFs, and cryptocurrencies, meaning that investors may not have access to a wide range of other investment types, such as bonds and mutual funds.
All in all, Trading 212 is a good option for investors looking for a commission-free investment platform that provides access to a range of investment tools and resources. While the platform’s investment options may be limited, the user-friendly app and commission-free trading make it an attractive option for cost-conscious investors. As with any investment platform, investors should weigh the pros and cons and do their research before choosing an investment platform.
Creating a Diversified Portfolio
Once you’ve chosen an investment platform, it’s time to create a diversified portfolio. Diversification is key to reducing risk in your investment portfolio. By investing in a variety of assets, you can reduce the impact of any one investment performing poorly.
Here are some tips for creating a diversified portfolio:
Invest in different asset classes: Invest in a mix of stocks, bonds, funds, and property to create a diversified portfolio.
Invest in different sectors: Invest in different sectors of the economy to reduce your exposure to any one sector performing poorly.
Invest in different geographies: Invest in different countries to reduce your exposure to any one country’s economic downturn.
Rebalance your portfolio: Periodically rebalance your portfolio to ensure it remains diversified and aligned with your investment goals.
Understanding Risk and Return
Investing involves a tradeoff between risk and return. Generally, higher risk investments offer the potential for higher returns, while lower risk investments offer more stable returns.
It’s important to understand your risk tolerance before investing. Risk tolerance refers to your ability to tolerate the ups and downs of the stock market. If you have a low risk tolerance, you may want to invest in more stable investments like bonds or funds. If you have a higher risk tolerance, you may want to invest in stocks or property.
It’s also important to understand your investment goals. Are you investing for retirement, a down payment on a house, or to pay for your children’s education? Understanding your investment goals can help you choose the right investments and create a plan to achieve those goals.
Final Thoughts
Investing can be an excellent way for moms in the UK to build wealth over time and secure their financial future. By understanding the different types of investments, choosing the right investment platform, creating a diversified portfolio, and understanding risk and return, anyone can start investing and grow their wealth.
Remember, investing involves risk, and there are no guarantees of returns. It’s important to do your research and invest with a long-term perspective. With patience, discipline, and a little bit of knowledge, anyone can start investing and build a brighter financial future for themselves and their families.