No savings at 40? I would start by investing £1,000 in a Stocks and Shares ISA

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If I hadn’t accumulated retirement savings by the time I turned 40, I would go online and immediately create a Stocks and Shares ISA.

It’s not that hard to do. There are many online investment platforms to choose from, including A.BellBestinvest, Charles Stanley Direct, Hargreaves Lansdown and interactive investor. All you need are a few personal details and a debit card, and an investor must be prepared to trade.

Getting out of stocks and ISA shares is the easy part. Every UK adult can invest up to £20,000 a year in any stock or investment fund they choose, and all their capital growth and dividend income will be tax free for life.

I would quickly set up a Stocks and Shares ISA

Choosing which investments to buy is more complicated. We should all have money in an easily accessible bank account to cover emergency expenses, but that’s no place to leave long-term wealth.

At 40, retirement is still at least 25 years away for most people (and possibly longer than that). Over such a long period of time, history shows that money should work much harder if invested in the stock market.

No one should invest in stocks for less than five years. Such a short timescale does not give investors enough time to recover from stock market volatility. Also, the longer the money is invested, the more likely it is to accumulate and grow.

This is especially the case if I reinvest all the company dividends I receive directly into my portfolio, to buy even more shares.

Being a newbie investor can be nerve-wracking. I would start with a relatively small sum, say £1000. Or maybe just £500, to see how things go. The easiest way to invest would be to put money into a tracking fund that tracks the performance of a UK-based index, such as the FTSE100 or FTSE All-Share.

funds such as the iShares Core FTSE 100 or vanguard FTSE All-Share Index give investors exposure to a range of different companies, in order to diversify and reduce risk. However, at The Fool, we favor buying individual stocks instead.

I would buy individual shares of the FTSE 100

We believe that building up a range of different companies can help investors outpace the broader market over the long term. It’s more complicated than just buying a tracker fund, but it should end up being more rewarding, in our opinion. Don’t forget that the capital is not guaranteed and that the choice of actions can go up as well as down.

Currently, there are many top companies on the FTSE 100 trading at low valuations. This year has been volatile for the markets, but now is a good time to get in.

The big question is which stocks to buy from the thousands available. We think that’s the fun part. is full of views and opinions on a huge range of mainly UK stocks. If I had no savings at 40, I would start here.

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Harvey Jones does not hold any of the shares mentioned in this article. The Motley Fool UK has no position in any of the stocks mentioned. The opinions expressed on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we give in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of ideas makes us better investors.

Motley Fool United Kingdom 2022