Women and investing

Title: Investing Masterclass with the financial education programme ‘Your Juno’.  The speaker is Alexia De Broglie, co-founder of Your Juno. 

OK. Welcome everyone! It is so good to have you all in here with me in this webinar tonight. I'm very excited for the hour that we're going to be spending together and hopefully I'm going to answer a lot of your big questions when it comes to investing. I've really designed this hour to make it as approachable as possible and trying to remove as much of the intimidation from the topic. So, I am assuming zero prior knowledge and I'm really encouraging and inviting everyone to drop questions in the Q&A as we go along, and I'll try and answer as many as possible towards the end of the call.

But before we get started, I will introduce myself. I find this slide always a little bit awkward - just speaking about myself for a minute. So, I'll go through pretty quickly. The main thing you need to know is that I am incredibly passionate about helping women get clarity, gain control and gain confidence over managing their finances. I started a company about four years ago now which is a financial education app [Your Juno], and we've helped over 150,000 women in the UK on their investment journey, on their debt payoff journey, on their salary negotiation journey. Just really trying to give the tools to be able to build a brighter financial future. Before that, I was working in the world of finance. [Slide specifies Ex-PwC and McKinsey, and Forbes 30 under 30.] I was in consulting on the financial department side. And I am also a guest editor at the Financial Times.

But the main thing you need to know from this slide is that when I was at university there was a moment that for me was really defining. And that was: just as the markets came crashing down a few years ago, I noticed that a lot of my male friends were talking about investing. They were talking about cryptocurrencies. They were talking about building wealth. And I saw that a lot of my female friends were not being included in those conversations. The WhatsApp group chats were always mainly men. I was really struck by this, and thought ‘how come there is still such a legacy of outdated gender norms when it comes to the topic of finance? And is there something that we can do to close it?’ And so, I'm committing my life to the mission of closing the gender wealth gap and I'm doing this through financial education.

Now, that's what you need to know about me. Let's go into what you need to know about the next hour. Let's get the admin out of the way. The really important piece of information here is that the views I'm representing are Juno’s views. They're not Santander’s views. They're also only for educational purposes, so this is by no means financial advice. You need to go and seek support from a financial advisor to get personalised recommendations.

[Slide shows the following important information: This event is for Santander UK’s use for retail distribution and is for information only. It does not constitute an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Opinions expressed within this event, if any, are Your Juno’s current opinions as at 06/11/2024 and do not constitute investment or any other advice. The value of investments and income can fluctuate and is not guaranteed. Past performance is no guide to future performance.]

Now, in this meeting there is a Q&A function. It's just in the toggle bar. The invitation is to just write your questions whenever they arise, and I will be able to get back to them at the end of the call. We’re also going to have an interactive session, so there's going to be a few polls as we go along, but I'll explain how they work as we go into them.

So, setting the scene. first things first, I think it's always important to make your money relevant and see how it can actually change your life. Because I know that the topic of investing can be a little bit overwhelming.

Let's go back 50 years. We’re in the year 1974. You have just inherited, from a very distant relative, £10,000 and you are very excited about that money. But you don't exactly know what you’re going to do with it. There's basically 2 options that you're considering. The first one is to keep the £10,000 in cash. This means either you keep it in physical cash or you put it in a bank account, in a savings account, and you just don't touch it. Or, you decide ‘actually I am going to invest the £10,000 into the stock market’.

Now, fast forward to 2024, what do you believe would have happened? Your first poll is open in front of you. I'm going to read through the answers, and you can guess what the right answer is.

The first one is the cash would have stayed the same, but the investments would have decreased. Because we've had so many recessions over the last 50 years.

The second one is the cash would have stayed the same, but the investment would have grown tenfold.

And the last one is the cash would have decreased in value and the investments would have grown thirtyfold.

I'm going to share the results with you, so you can see what everyone else has said. So, what we can see is that 6% of you believe that the cash would have stayed the same and the investment would have decreased. About a third of you think that the cash would stay the same, but the investment would have grown quite a bit. And then 62% of you, who are right, think that the cash would have decreased in value and the investments would have grown thirtyfold. 

So the last one is obviously the right answer. Now we are going to look at the two graphs which I believe are the most important ones that you will see when it comes to the topic of money.

The first graph is what would have happened with £10,000 over 50 years had you kept it in cash. [Graph shows buying power of £10,000 from 1974-2024.] 

And what you can see is that the value of cash has gone down immensely. Actually, it's gone down so much that the £10,000 in cash today would only be worth £659. And the reason is inflation. I think we've all heard a lot about inflation in the last few years and inflation what it means is that the cost of basically everything is going up incredibly quickly but the money that you have in cash, that's not growing. The problem is, if you have £10,000 in cash, maybe you were able to buy a car back then. Nowadays, you wouldn't even be able to get… I don't know what you can get with £659, but definitely not a car. What you can see is, inflation erodes the power of your savings. If we just looked at tea for example, on average in the UK if you bought tea five years ago it was £1.80. Today it's £2.80. So, you can see how quickly prices are increasing and I think we're all feeling it. This is [what would have happened] if you’d have kept it in cash. 

Now what would have happened if you'd invested it? It would have grown to be the equivalent of £335,000 today. [Graph shows real S&P 500 returns, presented in 1974 dollars 1974-2024.]

Now this graph, we’ll come back to it again at the very end of the presentation. Because hopefully by then you will have understood everything that's going on here.

At the moment, all you need to know is had you invested £10,000 in the S&P 500 (we’ll cover what this is, don't worry!), you would have equivalent of £300,000 today. So, you can see that there's a very clear difference between having it in cash and having it in investments. Now I just want to say, this is obviously a historical example and what has happened over the last 50 years, we don't know that this will happen again in the next 50 years. But we're basing ourselves on what has happened historically, and historical data, to make future assumptions in this case.

When I think of personal finance, and I believe Santander shares this view, we think of sliding door moments, we think of these key moments in life where one decision or something that's happened to you can make a radical change. And I really believe that back then, 50 years ago, with £10,000, it is a radical change of lifestyle that has been created, just by being able to know how to invest that money.

My hope today is that for everyone who is attending this call we are at the beginning of one of these sliding door moments and that I'm planting a seed. The seed of having the confidence to start investing. That you're going to take away and you're going to do further research and that this might be for you one of these moments where you can look back at it, and thank yourself for making maybe a riskier and a bolder decision, but hopefully one that will pay off.  

So how does investing actually work? Let's dive into the very meat of it. To get started, what is the difference between saving and investing? We’ve seen what the difference in outcome is, but what is the difference in behaviour?

When you're saving, you're essentially putting cash aside and the idea is that you're keeping this cash for short to medium term goals. When you're investing, what you're doing is that you're buying something with that money and you're hoping that the value of what you're buying is going to increase over time.

Now, there's lots of different things that you can buy - investing isn't just investing in the stock markets. You can invest by buying a Hermes bag, you can invest by buying an apartment, you can invest by buying a piece of art. There's a lot of different ways to invest, but the idea is ‘I'm buying something because I think it's going to increase in value over time’.

And now, obviously, because this increase in value needs to happen, you need to give it some time. So that makes sense, that investing is for goals that are usually a little bit further away. So, 5-7 years is the minimum that we say you need to have your money invested. If you have a goal that is in 2 years’ time - if you want to buy a house and you need the deposit, and you need that money in 2 years - the idea is not to invest that, because you don't know for sure that it's going to go up in price.

Now, the typical assets that you would purchase is investment funds, so baskets of investments. And when you're saving, it’s cash. Obviously, the sort of return that you can get from a cash account - I think today you might be lucky that you get a little bit higher - you might be able to get sort of 4.5% if you're very lucky, but it's still not a lot. Whereas, when it comes to investing if we look back at historical data it's been more or less 8% on year. So the annual growth is typically higher.

So we kind of know there's a difference between saving and investing. Now I think everyone here in this call is probably very keen to start investing, because I've sold it pretty well, but I wouldn't do my job properly if I sent all of you off to start investing. Investing is obviously risky, and your capital might go up, but it might also go down. Not everyone is ready to start investing tomorrow. There are three things that you need to do before you start investing and those three things are: 

1. Having an emergency fund. An emergency fund is money that you set aside for a rainy day and that you do not touch should there be a sale by your favourite company online. You really keep it in a separate account, and you don't touch it. And typically, the first question that comes up is ‘OK, how much do I need in an emergency fund?’

   What I would say is it's three months of essential living expenses. Essential living expenses is rent, food, utilities, if you have medical bills, anything that you need to survive. You multiply it by 3 and then that's how much you need to have saved up in an emergency fund. And you don't want to have this in your general bank account, just mixed in with everything else. I want to reduce the amount of mental math that you have to do. Money needs to be easy. So, you open a separate pot or a separate account and you put your emergency fund in this. Try and find the highest interest savings account. And then you know that this is for emergencies, and you don't touch it.

2. Clearing any high interest debt that you might have. So high interest debt is typically something that has an interest rate of more than 8%. More or less. it could be 7% or 9%.

   [On screen: High interest debt is any loan with interest rates above 8%, such as credit card debt and payday loans. Your student debt and mortgage are typically not considered high interest debt.]

   None of it's a hard rule, but the idea is your debt that has a high interest rate is growing. It's growing very quickly. If you're trying to invest your money with the hope that you're going to have more money in the future, but at the moment your debt is also growing, what you're doing is you're trying to fill a bucket that has holes at the bottom. And so, obviously, if you were in that scenario the first thing you would do is try to fill the holes first and then fill it with water. And you want to do the same when it comes to investing. You want to make sure that the high interest debt is paid off first. Because that is your leak in the bucket. That's where your money is going out, so close that first and then you try and fill it by investing.

3. Maxing out your employee pension contributions. So here it's not fair, not everyone will have the same contracts or the same working situation. But some employers, quite a lot of employers in the UK, will actually pay more into your workplace pension if you tell them that you're also going to increase your own contributions. So, it's one of the only moments where you can get free money in the UK.

   So the way it works is, imagine you are contributing 3% of your income to your pension and your employer is contributing 5%. This is pretty standard. If you go to see your employer and you're saying ‘hey I'm actually going to increase my contributions by 3% so actually I'm going to be paying 6%’, they might say ‘OK, that's good. I'm going to do the same - I'm going to bump you by the same amount, so 3%’. And so, they're going to pay you 8% now instead of 5% and that means that in total you're getting 14%. So that 3% that your employer is contributing on top is free money, it's not being taken out of your pay. So, make sure that you max out any employer pension contributions.

   If this is something that your employer doesn't do today, take it with you into a salary negotiation in the future. It might be that you’re looking at a different employer or that you stay with the same employer, but you’re due for a raise. This is something you can bring up as a negotiation tactic: ‘I want higher employee pension contributions’.

OK, now let's go into the different asset classes that you can invest in. I just want this to be background information, I don't want you to get overwhelmed with all the information that I'm going to share here. But what you need to know is that there are essentially different things that you can purchase.

1. Cash is the one that we all know very, very well. I think we know what this means, and I don’t need to share a lot of detail. It’s what you keep in your bank account.
2. Property is the second one that we also know very well. When you purchase a property to either live in or an investment property, this is also investing.
3. Bonds. Bonds are essentially when you are lending the government, or a company, a certain amount of money. They are promising to pay you back in the future and on top of that, in order to say thank you for lending the money, you are going to get a little bit of interest. So, a bond is essentially, if you think about the mortgage that you have on your house, you are essentially being the bank but for the companies or the government.
4. Alternatives. This is all the things like cryptocurrencies, the Hermes bags I was mentioning, really expensive wine, everything that is kind of non-traditional investment tool.
5. Commodities is oil, gas, gold, that type of stuff. 
6. Shares is the one we are going to be talking about today. And shares are, very simply put, a small stake in a company. A very small piece of a huge company. If we take the example of Apple, Apple has over 2 billion shares outstanding today. So, you, as an investor, you can own a share of Apple which is one 200 billionth. Or you can own 10,000 shares of Apple. You essentially just own a tiny piece of that company and the way in which you access this tiny piece of the company is on something that is called the stock market or the share market.

When we speak about stocks or shares you can kind-of assume that it means the same. There is a small grammatical difference, but it really doesn’t matter. So, stocks and shares are the same and when you want to buy a tiny piece of Apple you go on the stock market. Now the stock market is not one universal thing that the entire world is using. The stock market, just like every market in the world, has a number of stock exchanges. So, you have a vegetable market that may be in London, a vegetable market that may be in Brighton, and it's the same when it comes to the stock market. There's different stock exchanges where you can purchase different types of companies.

You might have heard about, for example, two of the big stock exchanges that exist in the US. There is the Nasdaq, or the New York Stock Exchange (NYSE). Both of those exist in the US - it’s two different stock exchanges in one country and it will just trade different types of companies. So, Nasdaq will be more tech companies. A company will be listed on either of those. And the way we think about the performance of a specific stock exchange is by looking at what's called market indexes. 

The best way you can think about them is like a class average. So, if we think of the London Stock Exchange, how do I know how it's performing as a whole? It has all of the British public companies on it. Actually, what I'm going to be looking at is the performance of the FTSE 100. What it means is very simple - the 100 biggest companies on the London Stock Exchange. If I want to look at the performance of the New York Stock Exchange, I look at the S&P 500 - the 500 biggest US companies. Paris Stock Exchange, I look at the CAC 40 - 40 biggest French companies.  

So, you've seen those numbers before, they look intimidating, [but] it's really not that complicated once you know what's behind it, and that's the case with a lot of finance. It's very jargony but once you understand it, it's very easy. And you might recognise the S&P 500 from a graph that we've seen on what would have happened to £10,000 had you invested it. I used this as an example. So, what it means is that you actually just invested the £10,000 in the 500 biggest US companies. That's how we got the results that we saw before.

So, now you know what a stock market is, you know what a share is, you know that you might want to purchase some shares. What actually influences the price of the share? What makes it go up and down?

There's no science here - no one really knows, otherwise you would be incredibly rich. But there are, broadly speaking, 3 things that influence the price of a share. 

The first one is internal performance - how well is a company actually doing? When a company is traded on the Stock Exchange, it means that people like you and me can buy it. So, it means they need to reveal a lot of information on how they are performing, because that’s how people like you and I are going to decide if we want to purchase it. And so, they do all of these reports which they publish and typically what happens is reports might be a little bit better or a little bit worse than what was expected.

So, if we take the example of Disney, they posted a revenue of $18.5 billion revenue and the expectation was $18.8 billion revenue. So you can imagine, that came out, it was a bit lower than expected, and whoop! The share price dropped by 4%. So the company performance is a big, big driver.

Then another element is something that is out of control from the companies, and that's how well is the economy going? We have all seen these very, very alarming newspaper fronts everywhere: ‘stock market biggest fall since 2008’. I mean, it’s very fear mongering, but the economy influences share prices. 

And last one, the least measurable and tangible, is called investor sentiment, or how investors, people like you and me, perceive a company. Now especially, with the age of social media, what we’re seeing is that there are scandals being outed all the time. And actually, if someone like Mark Zuckerberg says something, or tweets something, that doesn’t land very well, the share price of Facebook or Meta could actually go down quite a bit even though the company is doing the same and the economy is the same. So, there's this investor sentiment that goes into it as well.  

So, now that we know how the stock price is actually affected, let’s go into the big question of how do you actually make money investing in shares? 

There's two main things: the first one is growth and the second one is dividends. The main way you’re going to make money is growth. Dividends is a lot smaller. But growth is very easy: you buy something, and you sell for more. That’s it, and the difference is called capital gain. So that's how much money you've made. Now when it comes to growth, let’s look at an example. Apple in 2014 cost $22.00 for one share and here we can see that 10 years later [one share costs] $233. So in 10 years, by doing nothing, had you been an investor in Apple you would have made $211. That’s owning one share - imagine if you’d owned 100 shares. This is always where I like to think about investing as the best way to make money if you are a little bit lazy as well. Because what's happening is that you have invested in Apple, you are at home - you might be watching Netflix with your family, you are actually spending time on the things you enjoy doing - and people at Apple have hired the best talent in the entire world to work so much to be able to get the best results possible. And then you benefit from that. It's a sort of cheeky way to look at investing - you're benefiting from some of the world's best talent without actually necessarily needing to contribute. 

When it comes to growth, the graph that I really want you to remember, that we have already looked at once, is the performance of the S&P 500 or just the general performance of the stock exchanges. A lot of people, when they start investing, say ‘OK, I need to find the winning company. I need to find the one that's going to do well’. And then they go online and they get overwhelmed, because there's hundreds of thousands of companies that you can purchase.

How do you figure out which one is going to do well? It's impossible. What I want to share with you today is: forget that. It’s not the right strategy. What you want to be doing is investing in the growth of the economy. Because what we’ve seen in the past is the economy overall seems to be continuously growing. It moves in periods of boom and bust, boom and bust, boom and bust, but overall it goes up. We’ve had some pretty big crises. We’ve had the dot-com bubble. We have had the great financial crisis. We’ve had the Covid crisis. And every time you see the newspaper headlines, the world is going under, the economy is shattering. But when you look at the graph of the 500 biggest US companies, actually what you can see is, yes it goes down, but overall it’s trending upwards the whole time. So, if you just invest in the economy, i.e. you invest in the 500 biggest companies without picking a winner, this is what your money will be doing as well.

This brings us to the second point, which is dividends. Dividends are essentially a ‘thank you’ from the companies that you invest in. They are saying: ‘you are an investor, thank you for believing in us. Thank you for your loyalty. We’ve made a bit of money last quarter so we are going to give some to you.’

It's essentially just them sharing the profits that they've made with you. But they don't need to do it, so often dividend payments come at the cost of growth. Because if I have a company, I can decide to open a new factory and I will need all the profits I have made to do that, or I can give the profit to my shareholders. Obviously, as a shareholder you want the profit but at the same time, if they’re not opening a factory, they are not going to be growing as much. So, dividends and growth tend to be on opposing sides of the scale. And with dividends there's absolutely no law on how much they need to give you. They decide in a board meeting ‘this quarter we are going to give this much’ and then next quarter it can be completely different. It’s really just a thank you note. 

This is the most important part of the entire presentation, and I want everyone to be super focused for this piece: 

There is something called compound interest. Compound interest is what Einstein called the ‘eighth wonder of the world’. He's a pretty smart man so we're going to take his word for it. 

[slide shows the full quote: “compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it.”] Compound interest is why, when you are investing, you are seeing your money growing exponentially and not in a flat way.  

So why is it that growth becomes quicker and quicker? The way in which compound interest works I am going to explain in two ways, using 2 examples.

First example: Well, let's look at it over four years. You have £10,000 and it grows by 10% every year. Just 10%. What you can see is that from year 1 to year 1 you are receiving £1000. That's how much it's grown by. But year 2 to year 3 you've received £1100. It's more than £1000, because you have more to do the 10% growth on. Same thing happens year 3 to year 4 - you receive even more than the previous year (£1,210) and that's because, maybe it's just growing by 10% but, 10% of 13,000 is a lot more than 10% of 10,000. So, your money is growing exponentially. What it means is that the steps that you're taking here are becoming steeper and steeper and steeper and your money is growing quicker and quicker.

Now let’s look at an example of an 8% growth over 50 years. So, 8%. Remember, I said that was more-or-less average when it comes to investing. Now £10,000, if it grows by 8% every single year for 50 years (without ever adding anything else to it, so it's just £10,000), becomes over half a million pounds. And that's because 8% year after year is bigger and bigger and bigger and bigger. So, this is the power of investing. You need time for it to come into consideration and you need to not take your money out when the market might be going down, so it really is a long-term commitment. 

I think when a lot of people see this graph, they get a little bit scared, because 50 years might not be what you have before retirement anymore. What I would say is, in 11 years your money doubles at least, and that’s already a huge, huge jump from just keeping it in a savings account. This is if it grows by 8% of course, which we can't guarantee. But this is one of the most powerful ways that you could potentially build intergenerational wealth. If you invested £10,000 on behalf of one of your children, they definitely have 50 years, so you're almost sorting out their retirement fund by being able to commit this during their childhood. So, it's a way of thinking in the long term and what you can give back to the next generation.

This brings us to the first golden rule. We've also already covered this, which is invest for the long term. The reason you want to invest for the long term (you should already know this by now), but the first one is compound interest takes years to build - we’ve seen this. This exponential growth means that the longer your money is invested, the higher your potential returns, which means take this as a sliding door moment. Don't postpone investing by another 10 years. You will be biting your fingernails (I think that's an expression) by not having started earlier. Time is really your strongest asset when it comes to investing. And then the second one is because we've seen that the market moves in periods of up and down. So, if you stay invested for a long time there's a higher chance that it will go upwards overall and that you won't invest and then just take your money out when there's a recession. So that's two reasons why you need to think of it in the long term.

When it comes to investing, another huge mistake that I see people make is they go to the pub, hear some friends talking about something and then they go back home and do the same. We all have different goals, we all have different risk-taking enjoyments, we all have different amount of savings and so actually we all need an investment strategy that is in line with us.

For example, something that is very important to me is to have ethical investments. That might not be important to my aunt, and so it’s really important to think ‘what is my own investment strategy?’ and to build this investment strategy. You essentially want to find out what is going to be your asset allocation, how are you going to decide ‘this is the money I am going to invest, where am I going to put the different pieces of the pie?’ You can think of asset allocation as cutting up the pie of your money and deciding where to put the different pieces.

If you go and see a wealth manager, they will give you a questionnaire to figure out what type of investor you might be, and then they're going to give you an asset allocation as a result of that questionnaire. They're trying to figure out who you are and then based on this they are going to give you a strategy. Now, we don't have time to do this [type of quiz] as a big exercise with everyone, but I've broken it down and we can go into it in a bit more of a playful way with five questions. The five questions are going to cover the five areas that a wealth manager would look at.

1. What is your financial situation? The more money you have, the higher earnings and the more stability, you have the more risk you can take.  
2. What is your investment proficiency? How familiar are you with investing? The more familiar you are, the more risk you can take.  
3. Investment horizon? How long are you planning to invest your money? The longer you're planning to invest it for, the more risk you can take.  
4. What is your risk appetite? Are you someone that really thinks of gains all the time - you prefer making more money and you don't care so much about the losses? Or are you someone that's really anxious about potentially losing a bit of money? It's just a personal question here. The more risk-taking you enjoy, the more risk you can obviously take.  
5. How easily are you influenced by others? Others also count as the news headlines. If you see the news saying that we're going into a huge recession are you going to go into panic, go into your investment app and sell everything? If that's you then you really want to stick to a lower risk investment strategy. If you're someone that can cut out the noise and just stay in your own idea of what’s right, then you might be able to take a bit more risk. It’s really just about assessing where you fall. 

 So we’ll do a little quiz here. It's 5 questions and you're going to keep track of your points. 

• If you answer “A” you give yourself 2 points
• If answer “B” you give yourself no points
• If you answer “C” you subtract 2 points, so you do -2 points  

What's really important here is there's no right or wrong. I'm trying to put you into different categories which is why we're doing the points, but having more points is by no means ‘better’ than having less points. 

1. How do you feel about the current market?      

   a. Optimistic

   b. Confused

   c. Terrified  

2. How long do you plan to invest for? 

   a. 10+ years

   b. 5 to 10 years

   c. Less than five years  

3. What state are you finances in generally? 

   a. A plump cushion of savings

   b. Just enough for an emergency

   c. Spending a little bit too much at the moment  

4. What kind of return do you want to get?  

   (Remember that in a savings account you might be getting around 3% and when you invest you typically get around 8%, but obviously none of this is guaranteed.)  

   a. 10 to 20% return (That's a lot. That means in a given year it might drop by 50%. It doesn’t mean that you're comfortable with losing 50% of your money, it just means that if you're investing for 15 years there might be years where it drops quite a bit. Are you OK with that?)

   b. 5-8% (a more standard investment return, which means you’d accept a 10% loss in a given year)

   c. a stable 1-4% return (based on current interest rates in savings) 

5. Would you choose £1000 in cash or the chance to gamble it for a potential £100,000? 

   a. I want the £100K - go big or go home

   b. Can I bet half of it?

   c. £1k please and thanks, I’m happy with that

Now add your points together. Remember: there were 5 questions, so there 5 points to add together. Then enter it into the polls and then, anonymously of course, we can see where we all fall and what type of investors we are. 

What we can see is that we have 5% that are under 0. You fall into the category of our “Ed Sheerans” or the conservative investors. You know what works, you don't like to take risks, you just want to stick to it. So when it comes to money, that means your priority is to safeguard your current money. You're more worried about making sure that doesn't go away than about growing it a lot. It might mean that you’re closer to retirement, it might mean that you need to use your money sooner rather than later. What that means for your asset allocation is that you’re going to have a lot more safe assets. Safe assets are bonds. Bonds are a lot safer than stocks and shares and you will only have about 20% of your overall pie in actual stocks and shares. 

Now we have 65% who are balanced. You are the “Shakira” investors which means you care both about growth and preservation. You're kind of in the middle ground, so that means you're going to want to take a little bit more risk than the conservatives but not too much. You are going to have cash a little bit still, remember essentially your emergency fund, more or less 5%, and then you're going to have 30% of bonds which is a little bit more still but 65% will be in stocks and shares. 

And then the last one, about 70 people, 28%, are our “Lady Gagas” - the aggressive investors. I’m also one of those. You might be investing for the long term; you may have a really risky appetite. You just want to go for growth, growth at all costs. I want to get my money growing bigger and that means you need to take more risk, so 90% of your assets will be in stocks and you will only have 5% in cash - that’s again your emergency fund - and 5% in bonds. 

I just want to make sure that you are super clear - this was a 5-question quiz. Please don’t base your investment decisions on this. It’s just to give you an idea of what actually happens and how we make sure to find where you fall. Actually, Santander has a financial quiz that you can take with a digital adviser – we’ll talk about it more at the end – that can support you actually in going through that quiz and figuring out where you fall and what is best for you. 

So, we need to go into our second golden rule. We have seen you have cash, you have bonds, you have shares. Don't invest in one thing only. Make sure you diversify your investment. It is a really, really important rule. Essentially you do not want to put all your eggs in one basket. If I had invested all of my money in a travel company at the beginning of Covid, I would have lost everything. Had I invested it in the 500 biggest US companies and a bit of cash and some bonds, actually I would have been fine. The travel company could have gone bankrupt, and I probably would not even have noticed it. So, make sure that you spread out your investments
When you diversify, there are essentially four ways you can do it. 

1. The first one is asset class. We have already talked about this: have some cash, have some shares, have some bonds, maybe, if you can afford it, have a property. 
2. You can diversify by geography so you can invest in the S&P 500 in US, you can invest in the FTSE 100 in the UK, you can invest in Asia. Just make sure you don’t rely on 1 country. 
3. Then there’s by industry, so making sure you don’t invest all of your money in tech but make sure that you purchase energy, tech, healthcare, retail, all of that. 
4. The last one is by company size. You can invest in companies that have different sizes, from start-ups all the way to biggest companies, making sure that you get a bit of variety.

I think the first thing that you’re thinking is ‘I just don’t have time to do all of this - how do I do it?’ and this is where funds come in. Funds are a basket of investments, essentially. When you purchase a fund, you purchase one thing, but in reality you’re purchasing a huge shopping trolley of things. In this fund you will have lots of different companies, you will have lots of different sectors. 

You can see here on the left, we have a fund and what it means is that there are 1218 companies inside of it. You’ve got energy, tech, healthcare, financial, industrials, telecoms, consumer staples, as opposed to just buying Apple - one company [shown on the right]. If Apple performs badly, you are in a tricky situation whereas if you have the fund, ideally you are exposed to a wider range of growth opportunities. So, if the economy grows, your fund is going to grow as well. There are funds that track the S&P 500, so instead of buying the 500 biggest US companies you can buy a fund which has the 500 biggest US companies. It is just an easy way of diversifying your investments. 

Which brings us to the very last piece - how can you legally shield your investments from the tax man. If you are living in the UK, you have something which everyone in the world is jealous of. It is something called an ISA which is an ‘individual savings account’. Essentially, the UK government is giving you tax-free capital gains. This does not exist in other countries. It's insane - as a foreigner, it's insane as a concept. What you can do is you can open a stocks and shares ISA, for example, - it's just an account type - and then if you invest through the stocks and shares ISA you will never pay any tax on that money ever and you're allowed to invest up to £20,000 every single year. If you don't do it in a given year, you lose that allowance and it starts back from zero, but you can open one with a lot of banks, and a lot of investment platforms have this. It means that you can invest without ever being taxed. 

Then there's something that's called the Lifetime ISA which is also a tax-free system but it's a little bit different. You can only retrieve the money when you want to purchase a home or if you're about to retire, but you get £1 free from the UK government for every £4 that you contribute. So, it's tax free and you get 25% extra as a gift from the UK government. The maximum contributions are £4000 per year and the idea here is they want to help you buy a first home and they want to help you save up for retirement.

So, make sure that you check out what the different ISAs are, because if you're going to start investing, don't do it in a way where you are going to pay a lot of taxes when there’s a way to do it tax-free.

And we're going to close, before going into the Santander specifics, with this graph again. Because I promised that we would. You now look at it and hopefully you understand everything. In 1974, if you invested £10,000 in a fund (we now know what that is) it tracks the S&P 500, (we now know what that is) using a stocks and shares ISA, in 2024 you could retire with around £335,700 without paying any tax.

Now we opened by saying you would know how to do this by the end of the call. I hope that this has been clear enough that you feel confident to be able to replicate this for the future. I'm not endorsing investing in the S&P 500 at all, this is just an example. You have a lot of different things you can invest in. But just looking back at something from the past, this would have led to these results. 
If you’re on this call, you are most likely a Santander customer, and the first question that's going to come up is ‘what is the first step I need to do?’ The first step is you need to open an investment account. And opening an investment account with Santander actually has some pros and some cons well - a lot of pros. What you can see is that you can open both a Stocks and Shares ISA and a regular investment account. So you can have both the tax-free and the normal one.

You can get started with anything, so £20 per month or £100 lump sum. You don't need to have £10,000. You don't need to be rich to get started investing. You can get started with something really, really, really, small and actually, if we look back at this graph [the graph showing the S&P 500 growth], if you’d invested £1000 you would still have £33,000. If you'd invested £100 you would still have £3000 so it works with any amount that you use. Just make sure that you get started.

And then it [using the Santander Investment Hub] also means that you can see all of your money in one place, and you can actually manage investments from your app directly so from your phone. What you can’t do is pick out individual shares - you can't pick out Apple for example. The only thing you can pick out is funds, but we've seen that this is probably the easiest way to get started. 

When you’ve opened the account there's 2 routes that you can go. The first one is the digital adviser - this means that you actually get a robot to support you on your investment journey. You only pay £20 and you're going to get an entire personalised recommendation on what you might be interested in investing. So, in the same way that we've done the quiz at the beginning to see what things you fall into, this digital adviser route allows you to essentially get a personalised recommendation from Santander. And it's limited, because there's four funds that they pick from in terms of what they think is best for you. 

Or, you could say “actually I want to go to the DIY route – I want to be totally flexible, I wanna invest in whatever I think is the best thing”. You'll have a bit lower fees, but the only problem is you won't have any guidance and it’s not necessarily easy and you're not sure they'll be diversified, because you might make some mistakes. 

I'm going to open up for questions here and try and cover as much as I can. 

On screen are links to the learn more about investing page and the Santander stocks and shares ISA page of Santander.co.uk.]

OK, so I can see that there's lots of questions in here. 

[Alexia reads out questions from the chat and then gives the answers.]

Q. Is it better to pay for mortgage as a priority before investing, to reduce the interest being paid on that? 

A. So it really depends. I'm sorry, but a lot of my answers are going to be it depends. It depends how big your mortgage interest rate is. Basically, if your mortgage interest rate is really high you need to make sure that it's not essentially a leaky bucket that you have, and then I would say you need to prioritise paying it off. You know, typically mortgage interest rates are not that high, so you might make more by investing than you would by paying off the mortgage. So let’s say you make 9% returns investing and you have a 6% mortgage, you’d be making more money investing and using that money to pay off the mortgage. So it really depends where your mortgage interest rate lies.

Q. There seems to be very little interest between a cash ISA and a stocks and shares ISA. Why is stocks and shares ISA worth it?  

A. OK. ISAs. You have different types - you have a cash ISA and you have a stocks and shares ISA. A cash ISA means that you just don't pay any tax on the interest that you might make from the cash account, so if you make 4% on your savings, you won’t pay interest on that. Now realistically, unless you have a lot of money in savings you probably won't be paying tax on that anyways so it's not that interesting. A stocks and shares ISA on the other hand - you won't be paying any tax on all of your future dividends and capital gains, which might be a lot higher than 2 or 3%. So if you're investing it’s definitely something to consider.

Q. What ethical funds can you recommend? 

A. I cannot recommend any ethical funds specifically, I am not allowed to do this, but you will be able to find solutions on Santander. 

Q. Do you have to make a monthly contribution to benefit from an investment? Can you instead just invest £1000 for the long term (five years) and still have a lot of benefits? 

A. Yes absolutely. So, when it comes to investing there’s two strategies. Actually, the results from the 2 strategies seem to be pretty much on par.  One strategy is called ‘pound cost averaging’. Again, fancy word. All that means is “I'm investing regularly” and the idea with this is if I invest £200 every month, I might be able to average out and miss out on the days where it’s really good or really bad. It kind of smooths out variations. 

But there's also people that say the longer your money is in the market the better, so if you have money, invest it all. Because actually, the earlier, the better. 

You'll find papers that claim both strategies are the winning strategies, which to me just means that there's not a clear winner. So yes, you can both invest regularly and invest all in one go. 

What I probably wouldn't do is invest everything. Let's say you have an inheritance of £20,000.  I wouldn’t invest all of that on one day, because you might get it on a bad day. So maybe spread it out over a few weeks, a few months or something, in little chunks. But you don’t have to invest every month for 15 years for it to work.  

Q. If I have a cash ISA and stocks and shares ISA, can I put £20K in each every year? 

A. No you get £20,000 for all of your ISAs. So, if you have a cash ISA and stocks and shares ISA you can do £10,000 and £10,000, £5,000 and £15,000. If you also have a Lifetime ISA, make sure that it's included, sort of £4,000, £10,000 and £6000. Basically £20,000 overall. 

Q. With the Santander Investment Hub, how many different funds can you choose from? 

A. There are a lot of funds on there. If you go down the digital advisers route it will pick out from 4 funds. But if you go down the DIY root there are a lot of solutions on there.

Q.  I am 50 years old, I haven't invested in stocks and shares and would like to start. With retirement age extending all the time, what can I have in place now to potentially have something to look forward to by the time I’m 70-75?

A. So let's take the example of 50 to 70 or 75. You actually have 20 or 25 years, which is a huge time window when it comes to investing. What you could look at is a graph of what has happened to the S&P 500 in just the last 10 years, and I think you'd be very surprised by how much it's grown and how quickly it's grown. So I definitely wouldn't be discouraged from the fact that you are 50 years old. There's actually quite a lot of time in front of you. The idea is just it's better to start now than never. Where I would get quite wary is if you told me ‘I want to retire in three years, I want to invest for only three years’. Because then it's a bit risky, like if the economy goes down, you don't want to just hit that. If it's 20 or 25 years, yeah. It's a huge timeframe.

Q. When do you know when to cash in on investments?

A. So, when it comes to taking your money out of investing, there's a few different ways that you can do it. The first one is you could start by paying yourself the dividends out. When you invest and you’re on the younger side, it's often recommended to not take the dividends out - to just automatically reinvest them. Because you'll see that with that money reinvested, it grows bigger and bigger and bigger. And then towards the age of retirement you can start taking the dividends out. So you'll get the dividend payments - that will already be a chunk of money - and then you can just decide to take some money out month after month after month as you need it. Oftentimes it's not necessarily recommended to say ‘I'm 63, I'm retiring and selling all of my investments’. Because you might live to 90 and that could be another 30 years invested. But just to take it out gradually as you need it.

Q. Do I need to pay for capital gains tax for the capital gain I earn from buying and selling stock using an investment ISA? I know I don't need to pay for interest, but not sure about the capital gains principle?

A. Yes, so it's free of tax for capital gains and dividends. So, I use the word interest when I talk about growth, but really it is capital gains. It is completely tax free under all circumstances when you invest through a stocks and shares ISA, unless you move overseas - then it’s a bit different.  

Q. My child is 16, I have 30K in a savings account. I know the money is not working for them there, but I'm confused what I should do for them. What are the options for good growth for when they reach old age to have a nice nest egg?

A. I mean first of all you have 30k in a savings account for your 16-year-old child. That is insane, amazing, I'm so happy for you. What I would look at here is a Junior ISA - you can actually open an investment account for your children. The max allowance is £9000 per year I believe, and that means that you can invest on behalf of your children without them paying tax later on. And I mean, if your child is 16, what it means is that the investment horizon is so long they might have 30 years, 40 years for that money to be invested which means you can take a bit more risk. So I wouldn't put too much into like bonds and cash but I would consider having actually a lot of it invested in the stock market. Obviously, I can't tell you what to invest in but stick to what we've covered which is a very well diversified portfolio - so funds that have lots of different companies in them.

Q. What happens to your lifetime ISA if you die before retirement?

A. That is a really good question. I believe it just goes and gets passed down as inheritance.

Q. How do you redeem your investment when you want to spend it and can you leave some and take some?

A. So when it comes to investing, when you purchase a share, you do it with your investment account. This could be with Santander and you say ‘hey, I want to purchase 10 shares of this fund’ and so that means that you're using the money that you have in your bank account to buy shares. When you want to redeem your investment, what you're saying is ‘I want to sell 10 shares’ and that's going to go back into cash. It's very simple, it's just an online transaction. So, you're buying a share and then you're selling it. And it's not like you need to wait for a seller to come up and to want to buy it off you - it all happens within seconds.

Q. You are speaking often of the S&P 500. Is that a better return than the FTSE 100?

A. Yes, historically speaking. The US, so far, has just been particularly good at growing. They have better tax situations; they have more funds. So yeah, I don't recommend it, but it has been growing quicker.

So, we have reached the end of our time together. I'm sorry if I haven’t been able to answer all of the questions but you will be able to learn a lot more about the topic of investing by scanning this QR code. Santander has some amazing resources left, right, and centre. I've worked with a lot of banks, and I have to say Santander really takes caring for their customers very seriously, so they will be able to guide you through the entire process, hopefully.

Thank you so much for today, it has been fantastic to have this hour with you and I hope that you have more questions answered than you have new questions.