What I’m about to say in the next sentence isn’t a scientific fact. But I’d be willing to bet that simply by reading this article, you’ll know more about investment that 90% of people. I think this because after reading a recent poll by Lottosend, it’s clear that most people haven’t done their investment homework. I’m an advocate for doing a little learning before you invest yourself. But in general, you don’t actually need to know that much stuff. The basics are all you need to know in order to invest better than most people, because of investment services like Betterment. Here’s what the poll shows.
33.4% of people think that property is the best way to invest. On the surface, this makes sense. After all, property is something people can see and feel (and taste and smell also, I guess). Stocks and bonds are immaterial, and they’re part of the scary Stock Market, that phantasmagoric financial miasma that rises and falls, casting up a wake of intimidating news headlines and pretentious analysts. I don’t blame people for not wanting to get involved, especially after recent news about the crash in China. But because most people don’t understand what the crash actually was, all that stuff can be a lot scarier to the average investor than it actually should be.
32.7% of people think that an ISA (European equivalent of the American IRA) is the best way to invest, and they’re not far wrong. The ISA offers tax protection to investments, and shelters cash savings completely. But because many people don’t put true investments in their ISA, this isn’t the best answer.
Stocks and shares come in next in this particular poll, at 11.6%. To me, this seems like a stab in the dark. Hand-picking individual stocks and shares has a bad name in investment circles. So-called “stock-pickers” fail a lot more than they succeed (though there are some really good ones out there). For this reason, stocks are often bound up in index mutual funds, which are further bound up in easier-to-trade ETFs. The Index represents the most successful stocks at any given moment. When stocks fail, as many do, they fall out of the index and are replaced by new, better-performing ones. It’s easy for an algorithm to do this work for you, so mutual funds and ETFs can be bought for a very cheap price, and represent a lot of growth potential for comparatively little risk. They work over the long term, as the stock market (as long as it has existed) has tended to grow reliably over years and decades (though not always in the short term).
But you have to look clear down to the bottom of this poll to find ETFs, which take up the very last place position at just 3.4% Though, again, I’m not here to talk down property investment or other investment forms. But to a lot of investment advisors, ETFs should be the #1 choice for beginning or average investors. The fact that it’s not is, simply by reading this article, you can do better at your investments than probably 90% of other people.