How I Started Investing - With Ease!
Neil Faulkner writes about his experiences investing in trackers.
Since forever, the financial services industry, from banks and insurers to advisors and pension providers, has worked hard to convince us that it is smarter than we are and that `ordinary' people can't possibly understand finance properly. They are wrong on both counts.Since The Motley Fool first showed its jingling face on the Web it has been exposing the financial services industry, which uses intentionally elaborate jargon and develops products which are so complex that you can't work out how you're being ripped off.However, thanks to the Internet, with a little research we can find the simple products that are better, cheaper, more reliable, require little time to set up and maintain, and are suitable for the vast majority of people.I learned about one of the shiningest of examples, index trackers, when I started reading The Motley Fool many years ago. I read how these funds (which automatically track indices, e.g. the FTSE All-Share) beat funds managed by humans more than 80% of the time. I read how the stock market has made average returns of around 11% per year (or 7% after inflation) over many decades, and how the stock market has beaten cash (say, in a savings account) 93% of the time over ten-year periods.I also read how, over fifty years, shares have outperformed savings by nine times, turning £1,000 into roughly £25,000. And that's after taking inflation into account!I read how you need hardly any time to pick or manage these tracker funds, because you simply have to choose an index and look for the cheapest one available (although you should always read the small print just in case). Then you let the fund grow over time.Of course, reading isn't doing, so it was quite a few more years before I got my first tracker. The first was in a company pension scheme. I scoured the list of funds in my pension documents for the ones that tracked the market. Then I selected the All-Share tracker.Since then, I moved to The Motley Fool, where my company pension tracks the FTSE 100. I have recently applied for a Fidelity Moneybuilder UK Index ISA, which tracks the All-Share again.Boring? Regrettably, yes. Reliable, cheap, quick, easy and Foolish? Yes!It's too early for me to even think about the performance of my investments. Investing is for the long term, because in the short term we're vulnerable to the volatile stock market, but in the long term we can expect it to climb quite nicely.For many people, `long term' means five to ten years. For me, I was lucky enough to be able to lock up my investments for 40 years. I still have most of those years to go.Of course, there are no guarantees. But the odds are hugely in favour of trackers over fund managers or savings accounts.> If you want to invest in a tracker you'll find several from Legal & General in our ISA centre. Another option is to look at ETFs as well, which are similar to trackers. You could buy an ETF via The Motley Fool ShareDealing Service.