New research from Barclays Smart Investor reveals where Brits are turning to before making investment decisions – with friends and family the most common source of guidance, particularly

amongst women. 

The pandemic has seen a rise of new investors entering the market with over a third (34 per cent) of these women, compared to 28 per cent of men. 

As investing for the first time can be a daunting experience, two fifths (42 per cent) of women are turning to those closest to them, speaking to friends and family before making decisions.

This figure drops to just under a third (29 per cent) for men, who are more likely to consult  an investment provider (31 per cent) or financial media (30 per cent). 

Amongst the influx of new investors, social media is twice as likely to be used as a source of information than those who have been investing for longer - 15 per cent of people who started investing before March 2020 turn to social media, compared to a third of those  who started after March 2020.

The pandemic has led to more of us taking stock of our own personal finances and both men (41 per cent) and women (40 per cent) have been equally as motivated to invest, in order to grow their wealth for the long term. For women, the pension gap is a key driver with retirement income listed as their biggest motivator (30 per cent). This is closely followed by creating opportunities to help their children financially in the future (27 per cent), and seeking to achieve financial freedom or to retire early (22 per cent). 

Male investors share similar ambitions, albeit retirement income is the most important factor for a higher percentage of men, with 32 per cent saying this the key reason they invest. Achieving financial freedom and being able to retire early is the second most important driver among men, with 28 per cent citing that as their primary goal. They are less motivated by the opportunity to help their children in the future, although 23 per cent said this was the main reason they invest.

Clare Francis, Director of Barclays Smart Investor, commented: “It’s great to see more women turning to investing as they seek to get their money working harder and think about long term financial goals. Discussing investments with friends and family can be really helpful, particularly if it contributes to making you feel more confident about what you’re doing because we know, lack of knowledge and confidence can be big barriers that often stop people from investing.

However, it is always important to be mindful,  when seeking help from people who aren’t investment professionals, that while their suggestions may be well intended, what’s right for them, may not be the best option for you. It’s therefore always worth doing some additional research or seeking professional  advice, to reassure yourself that you’re doing the right thing.”

Clare Francis, Director of Barclays Smart Investor, also shares her golden rules for investors:

1. Start with the long-term in mind - We often see the stock market portrayed as a high energy, risky environment, where investors make snap decisions in seconds with the aim of making lots of money. In reality, investing is something that should be viewed as a long-term play – it offers the potential to grow your money by more than you would if you left it all in cash but stockmarkets fall as well as rise, so there is risk involved. And you heighten that risk if you take a short-term approach because you may need to access your money at a time when the markets have dropped, increasing the chance of you losing money. This is why you should try and commit for at least five years, to give yourself the best chance of riding out any dips in the market.
2. Diversify, diversify, diversify - When starting out, it is common for people to invest in shares in a single company, but this is quite a high risk strategy as your fortunes are dependent on the performance of that one business. Therefore, try to spread your investments across various companies, regions and industries, as this will reduce the risk and lessen the chance of you losing money. The easiest way to do this is to invest in a fund rather than buy shares or bonds directly.
3. Make sure you have a cash savings buffer in place – It can be tempting to invest all of your cash into the market, particularly with savings rates so low. But it’s really important that you have a healthy savings balance on the side, to cover any short term needs or unexpected costs. The main reason for this is that if you invest all your money and the stock market falls, you may not be able to wait for it to recover so there is an increased risk you could lose money if you need to access it quickly. There’s no hard and fast rule as to how much you should have in cash before you start investing, as it depends on your individual circumstances, but it’s often suggested to aim for at least three months’ salary.
4. Remember, cash isn’t risk free – A lot of people are put off investing because they think it’s too risky. There is obviously some risk involved because stock markets can fall as well as rise. But there is also risk when it comes to keeping everything in cash. While you won’t lose money if you keep it in cash, your spending power can fall over time if the interest you earn doesn’t keep up with inflation – rising prices. £100 probably won’t buy you as much in 10 years’ time as it would today for example, which is why it’s important to try and get your money working as hard as possible for you.  And over the long term, while not guaranteed, stock markets tend to perform better than cash.
5. Make the most of your tax allowances – Every tax year, which runs from 6 April to 5 April, adults in the UK have an ISA allowance. It’s currently £20,000 and you won’t pay any tax on the returns made on money held within an ISA. You don’t have to invest the full amount, and you can take money out of an ISA at any time if you need to. It is therefore well worth making use of your ISA allowance each year as the value of the tax break can really mount up over time. Photo by Kaizenify, Wikimedia commons.