Learning How to Invest (Part 1)

What is investing all about? How do you start?

If you have decided to enter the world of investing, learning how to invest must now dominate your time and focus. Two steps will help you on your way.

Initially, you need to rebuild your financial outlook to prepare yourself in investing. After that, learn the technique of investing, for example, how to open a brokerage or a mutual fund account. These basic steps will launch your course to a meaningful and productive investment life.

Defining investing

In essence, investing involves spending your time, effort and resources to attain a higher objective. For instance, you spend weekends with a social group to do charitable work, use your talent in the arts to create works of beauty and value or apply your profession in your job or your business to earn a living. In the same way that you do these things hoping to gain valuable rewards, you likewise invest your money in a bond, mutual fund or stock with the goal of achieving material benefits in the future.

Specifically, investing requires putting your money into what is called a “security” — a term which refers to anything that is “secured” by other assets. Bonds, stocks, certificates of deposit and mutual funds are some forms of securities you can choose to invest in.

You can select from various methods of investing — some of which you may be familiar with from watching TV or browsing the Internet. You see a neatly-dressed, overly optimistic lad who stares at you onscreen, seated on a porch in Malibu Beach and fully hyped as to how amazingly easy it is to make big bucks in no time at all! Amusing, it all seems. For if it was really that easy, everyone would have learned the technique to such foolproof method. Unfortunately, only those promoting such wealth-building schemes seem to make money – and at the expense of many disappointed gullible takers.

So, here is the better option for you: Instead of spending $25 on the hardcover EZ Secrets to Untold Billions book and $500 for the EZ Seminar, invest it in yourself once you have gained the fundamental secrets to investing here.

Eradicate your debts now

Now that you are eager to go ahead and start investing once you learn how to, you certainly would want to know the next step. But rein in your enthusiasm for a while. Hold your horses while you check if you are really ready to take the ride of your life in investing. Now that you see the possibilities opened to you through the magic of compounded returns, you have to protect yourself from the same trap which you could be unwittingly locked in. Do away with high-interest debts that you may have at the present.

By the exact same law of compounding rates that will make your investments increase, you can rapidly incur hundreds of dollars in debt over time from a dollar. Having such an enormous debt as you invest would negate all your efforts in investing and saving your money. You will be better off as you are paying off your debt first, than risking your money and exposing yourself to greater danger. Hence, it is wiser to get rid of any high-interest debt first before you consider investing, although some low-interest or tax-advantageous debts can be tolerated.

Make each dollar you invest work for you; this is a mantra you can trust to protect you. This is because each dollar you keep from the hands of full-service brokers or financial professionals will build more wealth for you, as you will soon see.

Reward yourself first of all

To succeed as an investor, you must make investing an integral part of every day. That may sound difficult or tedious; but not really. You must realize that the act of buying something, say a cappuccino, will influence your daily finances as much as acquiring a home-equity loan to cover your credit-card payments.

That is not to say that you must act like a miser who cannot get a good night’s rest over a missing penny in her books. If you reward or pay yourself first, you need not worry so much.

Since you already spend valuable cash for such essential things as gas, water, electricity, credit cards, cable TV, phones and wifi access regularly, why not be the first to get your own precious money – be on top of that list! Keep a certain amount of cash as saving or self-investment each time you get your monthly or weekly check; and go on along as merrily as you can while that money grows over time.

We recommend that you stash away as much as you can; with at least 10% of your annual salary of your gross pay as a reasonable target. Without neglecting your liabilities, you may surprise yourself how much you can save over time. Unless you do it, you will never find out. Of course, the higher the target you set for yourself, the more savings you will create. Save a little; it will come in handy when you need it. The only future you can look forward to is that one you secure for yourself today.

Make good use of online banking and brokerage-service providers. You can set up regular automatic money transfers from your checking account to your savings account (or vice-versa) or from any investing instrument you prefer. Discover how you can live on a lot less than what you spend now; start with discarding some luxuries or any unnecessary trips to the mall or the bar. You will notice a significant difference within a month or two. If you think the sacrifice is not worth the money you saved; then spend it on a trip to a dream destination and see how saving can alter your life in radical ways.

It is never too late to start saving. If you have practically nothing left after all the bills payment, try to reduce the amount you set aside regularly. Maybe the timing is not right for you yet if you find out you cannot afford to squeeze in even a piggy bank. No worries; wait till you are in a position to do so.

Active and passive methods of investing

There are two primary methods of stock investing: active and passive management; and they differ on how stocks are chosen, not on how you choose your verbs. Active investing involves selecting stocks yourself or you can ask your brokers or fund managers to pick the stocks, bonds, and other forms of investments. Passive investing requires you to let your holdings follow an index which a third party makes.

In general, stock investing means active investing. Although it seems preferable over passive investing, active investing does not always turn out to be better. Over the long-term duration, most actively-managed stock mutual funds have not reached the level of the S&P 500 Index, the dominant standard for index funds.

Because of that, some investors choose an alternative to “active” investing. A lot of people prefer passive investing as they are satisfied with a return close to that of a major stock index. You may choose to follow other indexes, such as the Russell 2000 for small-cap stocks, the Wilshire 5000 for the broad market as a whole, and other global indexes.

Speculating versus investing

Perhaps, you may have heard of a close friend who struck it rich with options. Or you may have had moments of lucky streaks in the past where you won a sizeable amount of cash from a raffle or lottery. Why should you then enter into a long and slow process of investing your money which can only bring you a double-digit gain and not bundles of cash right away? Investing demands years of patience before you can finally reap the good harvest. What if you cannot wait that long?

Life does not always bring sunshine and roses when you want it to. We all know that. You will not become a celebrated investor like Warren Buffet if you match the performance of the S&P 500. Neither will losing your savings on some speculative gamble make you a hit overnight nor being in a bankruptcy court after you lose all your other assets later on.

If high-stakes gambling is the thrill you seek, plus all the appurtenant live shows and glittering lights, you are no different from those stock market gamblers who lose their money on apparently legitimate pursuits. We live by the axiom that investors “gamble” each time they put money in a venture they do not understand.

It happens to so many people. They overhear a story from their doctor’s plumber talking about a company named Sweet Pipes at a garden show. “This stock will fly like a rocket in a few months,” he whispers. If you rush home and tell your broker to buy 200 shares, you might as well be in Las Vegas!

What business is Sweet Pipes engaged in? Tobacco or garments? Have you any information about its main competitor Bronze Arches? How much did it make last quarter? You need to know a lot more about the company before you toss your precious money to it. Ample study and evaluation can save you a lot of money and anguish.

Speculating, in the end, is a sure way of losing the potential value of your dollar to build lasting wealth for you. It leads you to think of the great gain you can achieve right now while failing to do so, more often than not. On the other hand, your patience in investing can assure you of attaining your goals eventually.

How the elderly can be financially-protected

Getting old can bring about so many challenges which schooling and early experience could not train and prepare us sufficiently to eliminate or minimize the pain and loss. Take the case of Max Tharpe, an accomplished photographer, who managed to inherit a large stash of stocks which afforded him a comfortable life in retirement. Having no heirs to pass on his estate, he chose to donate his wealth to charitable church groups when he turned 87. And so, one day he went to the office of Edward Jones & Co. in Fort Lauderdale, Fla. in 2007 for that very purpose.

In February 2008, Mr. Tharpe asked his stockbroker to sell only one position, his Wachovia Bank shares, whose branch had given him such poor service. He also told the broker to maintain all the rest of his portfolio. And this is when the whole thing blew.

Based on the arbitration award handed down by the Financial Industry Regulatory Authority, or Finra, and the narrative account of Todd Zuckerbrod, Mr. Tharpe’s lawyer in the case filed against Edward Jones and its broker, William Holland, the story chronicles the extent to which scammers will go to fleece their clients, even the elderly.

It seems Holland took his sweet time, spending eight months to dispose of 30,464 Wachovia shares in a falling market, while making 81 unauthorized purchases using the sales proceeds. Holland also convinced Tharpe to liquidate a fully-matured insurance policy and to purchase an annuity in which Tharpe paid Holland a fat commission of $49,549.

How could a broker do that to an old man who probably lived a big part of his time visiting or staying in the hospital? An old man who had no way to comprehend, let alone suspect anything wrong with the insurance switch or even with his brokerage account. As he described the testimony at the Finra hearing, Atty. Zuckerbrod stated, “Mr. Tharpe was hardly focused; you could be conversing with him for a few minutes and then, all of a sudden, he would be talking about B-52 bombers flying in the skies.”

This kind of thing can happen to any elderly person – to you or to your parents. You could be 85 or so and still be smart enough to appreciate Warren Buffett’s counsel about index funds. However, two to three years down the road, you could become a sitting duck to clever cons out to cut 20% off your gains who share nothing to cover part of your losses.

How to buy investments

Buying investments can seem daunting if you haven’t done it before. Follow our step-by-step guide.

• Do you need help?
• Checklist for buying investments

Do you need help?

Have you decided what type of investment you want? Are you reasonably sure of what investment or product features you are looking for? If not, consider going to a financial adviser. The adviser will help you with these choices and with the buying process.

Checklist for buying investments

Are you intending to buy individual shares? You need to use a share dealing service and the cheapest tend to be online. You can find out about different types of service and search for a provider by:

• Visiting the Wealth Management Association website.
• Using the Investors Chronicle stockbroker comparison tool and table.
• Are you looking at investment funds? Use the Investment Association website to find out more about the types of funds available and where to go for more information. To compare these and other types of funds in more detail, you could look at specialist sites, such as Trustnet and Morningstar.

Where to buy investments

• Decide how you want to buy – for example, going direct to the provider, through a fund supermarket or through a broker. Usually you will buy online or by phone. Follow the link below to check out your options.
• Before you buy, consult the Financial Services Register run by the Financial Conduct Authority (FCA) to check the firm you decide to buy through is authorized to provide the types of investment or service that you’re interested in. If a firm isn’t authorized, report it to the FCA or police and do not do business with it.
• Read the Key Facts or Key Investor Information document for the investment before you buy. These documents set out important information that the provider must tell you (not required for single holdings of shares). If there is anything you do not understand, contact the provider for further details. If you are still unsure, you may want to consult a financial adviser.
• Check what fees and charges you will have to pay. Charges for the same product may vary according to how you buy or which broker you choose. So compare the cost of buying through different routes and firms.

Understanding investment fees

Check how you will be able to manage and keep track of your investment. For example, will you be sent regular statements? Will you have an online account? What’s the procedure for cashing in your investment later? How will you and the provider normally communicate – by email, online, phone, post?

Get more informed about investing

• Be suspicious if an investment seems too good to be true. Unless you can check what you are being told against an independent, trusted source, report the firm selling it to the FCA and walk away.
• Don’t be swayed by offers that require you to make up your mind today. It’s better to take your time to consider a deal properly even if it does cost a little more rather than be rushed into an expensive mistake or a scam.

A beginner’s guide to scams

• If the firm you are dealing with puts pressure on you in any way, don’t do business with them. They may want you to take a quick decision without time to consider whether the product is right for you. Or they might pressure you to buy a different type of product to the one you wanted, or invest more than you intended. Instead, use a different firm that you’ve checked is authorised by the FCA. Or, get independent advice.

High risk investment products

Beware toxic savings and investment products

• Once you have decided to buy, follow the firm’s instructions for going ahead with the deal. You will probably have to provide evidence of your identity and address – even if you have bought online or by phone, you may need to do this by post or in person at a local branch.
• Carefully read the documents you get confirming your investment. Are the details correct? Do you have a cooling-off period? If you do have a cooling-off period, this is a chance to reconsider your investment and change your mind if you want to

Do you need a financial adviser?

If you’re looking to invest, buy a financial product or plan for the longer term, whether or not you need financial advice will depend on a number of factors such as what product you are looking for, how complicated your finances and personal circumstances are and your short and long-term goals.

• What services do financial advisers offer?
• Types of financial adviser
• What are the benefits of getting advice?
• So when do you need financial advice?
• Find a financial adviser
• What services do financial advisers offer?

Professional financial advisers carry out a ‘fact find’ where they ask you detailed questions about your circumstances, your goals and how you feel about taking risks with your money. Then they recommend financial products that are suitable and affordable for you.

Types of financial adviser

Financial advisers offer services ranging from general financial planning and investment advice, to more specialist advice, such as the suitability of a particular product such as a pension.

In the case of investment products, some advisers are ‘independent’ – meaning they offer advice on the full range of investment products from the market, while others offer a ‘restricted’ service meaning that the range of products or providers they will look at is limited.

What are the benefits of getting advice?

If you buy based on financial advice and a recommendation, you should get a product that meets your needs and is suitable for your particular circumstances.

Depending on the type of adviser you use, you may also have access to a wider range of choices than you’d be able to assess realistically on your own. You also have more protection if things go wrong if you buy based on advice – see below.

The difference between advice and ‘non-advised’ sales

Many banks, building societies and specialist brokers will talk you through your different options and leave it up to you to decide which product to take. In this case you are buying based on ‘information’ and have fewer rights to claim compensation if the product turns out to be unsuitable.

By contrast, if you end up with an unsuitable product after getting advice and a recommendation you could have a case for ‘mis-selling’ – though this doesn’t protect you against making losses if the market goes up or down.

What do you pay for financial advice?

The rules on fees for financial advice changed from 31 December 2012. If you are looking for general financial planning advice or for advice on buying particular investments you will pay a fee. Advisers must be clear upfront about what their fees are and agree with you in advance how you will pay them.

Before these changes, many financial advisers didn’t charge, but instead received a commission which was deducted from the customer’s initial or ongoing investment payments.

The changes were introduced to help make the cost of financial advice clearer and so that you can be sure the advice you receive will not be influenced by how much the adviser could earn from the investment.

Mortgages and most insurance products are not affected. However, some mortgage brokers may still charge upfront fees for advice, while others receive a flat rate introducer’s fee from the product provider. Receiving mortgage advice directly through your lender is usually free.

Is it cheaper to buy without advice?

You won’t have to pay an advice charge if you go direct. But you should weigh up the cost saving against potentially buying an unsuitable product or one which gives poor returns.

Advice can help you buy a better product than one you choose yourself. An adviser will also have the expertise and knowledge to find better options, as some products are only available if you go through an adviser.

So when do you need financial advice?

The answer partly depends on the product and partly on other factors.

Cash savings products

If you’re looking to put money into savings accounts, cash ISAs or fixed rate savings bonds it’s easy to DIY using comparison sites and tables. Because of the low risk you don’t need to get financial advice and you can buy directly from providers very easily.

Investments

If you’re thinking of investing in shares, unit trusts and other investments, you can go DIY but it will be more risky because these products are harder to understand than savings. There’s also a risk that you might lose money or buy a product that’s not suitable for you because you don’t understand it. So you really need to do your homework.

Ask yourself these questions:

• Do you have the time to do the research?
• Do you have much experience, knowledge or skills when it comes to investing?
• Can you afford to lose any money?
• If things go wrong, are you comfortable taking responsibility for any bad investing decisions?

If the answer to any of these is ‘No’ then seeking financial advice may be your best option. When trying to decide, also bear in mind the cost of fees against the financial and emotional cost of getting it wrong if you buy without advice.

Insurance or mortgages

Some insurance products and mortgages can be purchased using price comparison websites, or bought directly from suppliers.

However, there are also plenty of specialist brokers who will talk you through a range of options and may be able to get you a better deal. It’s up to you whether you buy with or without advice.

Pensions

If your employer offers a workplace pension they may also offer you access to advice or provide guidance about joining their scheme. You should take up this offer if available.

If you’re looking to invest in a personal pension, to boost your existing pension or to merge different pots from existing pensions it’s usually best to get advice unless you really understand how these products work.

Pensions are long-term investments so you need to be sure you understand the types of fund you’re investing in, the risks and the suitability for your particular situation.

Find a financial adviser

If you think that financial advice is for you, read our guide below to understand more about independent versus restricted advisers and to link to organizations that will help you find an adviser in your area.

The 10 Best Ways to Buy Tech Stocks

By: Kyle Woodley

U.S. News & World Report ranks the best exchange-traded funds for tech lovers.

Semiconductors, software and IT services.

The heart of the technology sector’s earnings season typically brings with it a lot of big swings, even in the bluest of blue-chip tech stocks. But you can avoid the volatility from quarterly tech earnings season by getting some of your exposure in a more well-rounded way: via exchange-traded funds, which let you invest in the sector as a whole, or in specific industries such as Internet companies or semiconductor makers. Here’s the top 10 tech ETFs as of this writing, as ranked by U.S. News & World Report.

1. Vanguard Information Technology ETF (VGT)

The dirt-cheap VGT is also a strong performer, beating out the S&P 500 in total returns at 143.46 percent to 136.74 percent since inception in late January 2014, and it’s no slouch at $9 billion in assets under management. Still, the XLK has the overall performance advantage, with 148.72 percent gains in that time. VGT is similarly constructed, though telecoms like AT&T and Verizon Communications (VZ) are utterly absent. If you’re driven by paying the absolute least for broad tech exposure, you’ll want to lean toward VGT.

2. Technology Select Sector SPDR ETF (XLK)

The XLK is the gold standard for tech funds – both the well-recognized and the largest with nearly $14 billion in assets under management. The XLK is a collection of all the tech favorites – Apple, Microsoft and Facebook, though it also features AT&T (T) in its top five holdings. The XLK also is one of the cheapest tech ETFs out there, and it even has a performance edge over the lifetime of the top-ranked fund out there, which we’ll look at next.

3. Guggenheim S&P 500 Equal Weight Technology ETF (RYT)

The RYT is, as the name would suggest, an equal-weight fund that invests in the Standard & Poor’s 500 index’s tech stocks — 68 blue-chip names. Thanks to the equal weighting methodology, no stock makes up more than 1.7 percent of the holdings. RYT has a heavy bent toward IT services and semiconductors, each at nearly a quarter of the fund. One note with the last of our equal-weighting funds – the methodology provided better diversification, but in the tech sector, not always (or even often) better returns.

4. iShares U.S. Technology (IYW)

The IYW would seem to be pretty spread out given that it has 140 holdings within America’s tech sector. However, this fund is extremely concentrated at the top, with the top five companies representing more than half of the IYW’s weight. Apple alone is a massive 17 percent of the fund, and Microsoft and Alphabet (GOOG, GOOGL) each take up 12 percent. This is a great fund when all is going well for technology’s most blue-chip stocks, but when the chips are down … watch out.

5. iShares Exponential Technologies ET (XT)

The iShares’ XT ETF aims to be at the forefront of the tech sector’s prevailing trends, using what it calls a “unique evaluation process to identify companies developing and/or leveraging promising technologies.” As a result, XT is invested in things such as 3D printing via 3D Systems Corp. (DDD) and Indian IT outsourcing via Wipro (WIT). This is another equal-weighted fund, with no stock making up more than 1 percent of the fund. Nearly 30 percent of the fund is invested in health care technology.

6. iShares North American Tech ETF (IGM)

The IGM is another broad-based tech fund, with this one focusing on roughly 275 North American tech companies. This is a traditional cap-weighted fund, so 30 percent of the fund is concentrated in its top 10 holdings, led by MSFT, AAPL and FB. However, investors are treated to a decent industry spread, with double-digit portions of the fund invested in five areas, including Internet software, storage and semiconductors. Internet retail comes close at nearly 9 percent of the fund.

7. Fidelity MSCI Information Technology Index (FTEC)

The FTEC is a broad-based ETF, focusing on mostly large-capitalization, growth-oriented stocks within the tech sector. Thus, you get consumer-facing hardware companies like Apple, software companies like Microsoft, Internet companies like Facebook (FB) and even payment tech companies such as Visa (V). While the FTEC is diversified in that it holds nearly 400 companies, this still is a top-heavy fund, with the top five companies weighted at nearly 45 percent, including a 13 percent-plus weighting for Apple – a common theme among many big tech ETFs.

8. Market Vectors Semiconductor ETF (SMH)

The SMH also invests in the tech sector’s semiconductor subsection. This is a very niche ETF of just 26 holdings currently, all involved in the production or other aspects of the chip business. Top holdings Intel Corp. (INTC) and Taiwan Semiconductor Manufacturing Co. (TSM) make up more than a quarter of the fund, but SMH offers some geographic diversification – a little more than 30 percent of the fund is invested in stocks from Taiwan, the Netherlands, Singapore, the U.K. and Bermuda.

9. SPDR S&P Semiconductor ETF (XSD)

The XSD is a diversified, balanced fund of semiconductor companies, almost all of which are in the U.S. What is notable is its equal-weighting methodology – XSD weighs each of its 40 holdings the same at each rebalancing so no one stock has an outsized effect on the ETF. However, weights do fluctuate in between rebalancing depending on performance, so currently; top holdings are Inphi Corp. (IPHI), Nvidia Corp. (NVDA) and Advanced Micro Devices (AMD).

10. iShares Global Tech (IXN)

You would imagine that the iShares Global Tech ETF took a worldwide view of the technology sphere, and you’d be less than a quarter correct. Less than 25 percent of the fund is invested in domiciled outside of the U.S.  with Japan leading the way at 5.1 percent. With heavily weighted top holdings such as Apple (AAPL, 12.5 percent) and Microsoft Corp. (MSFT, 8.9 percent) this fund shares a lot in common with most other broad tech funds.

How to Find a Financial Advisor

Although the use of financial planners is growing, most Americans still tend to take a do-it-yourself approach to building a portfolio and saving for retirement.

Forty percent of respondents in a 2015 survey by the Certified Financial Planner Board of Standards say they utilized financial advisors, an increase from 28 percent in 2010. And while most people are handling their own finances, there are distinct advantages to hiring a professional.

A financial advisor can give investors the discipline to resist investing or divesting reactively, says Angela Coleman, fiduciary investment advisor at Unified Trust Co., headquartered in Kentucky. “We take the emotion out of it,” Coleman says.

With the Internet, the world is awash with financial advice, and professional financial advisors can act as a filter, says Andrew Barnett, relationship director at Global Financial Private Capital in Sarasota, Florida.

Financial advisors are a good option for helping clients assess their risk tolerance and then build a portfolio that actually meets what they want, says Drew Horter, founder and president of Horter Investment Management in Cincinnati. He says many people who want to be conservative with their money actually have portfolios that are riskier than they’d like.

Kimberly Foss, founder and president of Empyrion Wealth Management and author of “Wealthy by Design: A 5-Step Plan for Financial Security,” recommends interviewing two or three advisors and having one to two meetings with each because this is a relationship that will last “hopefully for the rest of your life,” she says.

There are hundreds of thousands of personal financial advisors in America — 249,400 in 2014 according to the Bureau of Labor Statistics — so how should retail investors pick an advisor, whether they are independent or work with a large brokerage, a regional bank or an insurance company?

Consider the fiduciary standard. Barnett advises people to seek advisors who are fiduciaries, which means they are legally responsible to put the clients’ best interest in mind before their own.

Non-fiduciary advisors are required only to sell clients what they think is suitable for them. “Dealing with a fiduciary, I think, is critical,” Coleman says.

The Department of Labor recently approved a new rule that would require all financial professionals who offer investment advice for retirement accounts to follow the fiduciary standard. But while that rule covers investments in IRAs and 401(k)s, it doesn’t impact advisors who are recommending investments for a taxable brokerage account.

Know the pay structure and fees. Coleman recommends that people not pick advisors that are paid solely on commission. An alternative is fee-based advice, where clients are charged a set percentage of assets under management, she says.

Clients with fewer assets to manage may want to choose a fee-based advisor that charges by the hour or a flat annual fee, Coleman says.

Barnett notes that there are now more products such as annuities or real estate investment trusts available as fee-based products.

Opinions vary, but advisor fees could be anywhere from 1 to 2 percent of assets under management. If you have a lot with a financial advisor, that extra percent could be a tidy sum.

This fee is separate from other fees, such as those that come with mutual funds that are disclosed in the prospectus, so it’s important to ask advisors if they can break down all the costs of investing, which can include trading, custodial, accounting and sales fees, Barnett says.

Do your homework. Investors should also check into an advisor’s background, Coleman says. Know what certifications the advisor holds, and ask advisors for a list of current clients as references.

If an advisor won’t provide references, that is a sign of a problem, she says.

In addition to references, investors should ask for an advisor’s performance track record, Foss says.

Because a client may have a financial advisor for decades, it’s important to find someone they like and trust.

Sometimes that can be accomplished by getting to know the advisor, Coleman says, “Find someone you’ve got a good rapport with.”

Is a volatile stock market still the best alternative to risible savings rates?

Investing in shares is not without risk, but if you do your research and can commit to a long-term strategy you could prosper. Esther Shaw reports

Like many people who want to make their savings work for them, Louise Dungate has become increasingly frustrated by low interest rates. Undaunted by the prospect of taking a risk, the knitwear designer from Balham in south-west London decided to dip her toe in the stock market in an attempt to get a better return.

Despite the unsettled financial climate, the decision has proved profitable for the 29-year-old following her first investment 18 months ago. “Prior to that I’d had money in cash Isas,” she says. “As I’m self-employed I don’t have a regular salary, and need to make my money work as hard as it can.”

Dungate made her first investment in a self-invested personal pension (Sipp). More recently, she opened a stocks-and-shares Isa. “My Sipp now includes investments with Unilever and Lloyds. In the past 18 months I’ve seen the value of my portfolio rise by 4.74%,” she says.

Turning to the stock market could be a more attractive proposition for savers at present, with rates on cash at rock bottom. Ongoing low inflation, weaker economic data, global uncertainties and the weakness in the oil price mean there is little pressure on the Bank of England to raise interest rates any time soon.

Already, tens of millions of people have exposure to the market through their pension pot or Isa, but it’s been a turbulent start to the year. “It’s the worst start on record, in fact,” says Jason Hollands from adviser Tilney Bestinvest. “Markets have reacted to poor economic data from China. The FTSE 100 has been hit hard.”

But while the FTSE may have plunged, one of the upsides of lower share prices is that dividend yields have leapt up on many of these shares.

“The current yield on shares has increased significantly over the past nine months, with the yield of the FTSE 100 index now at a very attractive 4.25% per year,” says Patrick Connolly from adviser Chase de Vere. “The yields on some well-known individual shares look even more enticing, with HSBC at 7.6%, BP at 8.3%, Shell at 9% and Glencore at 14.4%.”

When you invest in shares, income is distributed in the form of dividends. These payments are usually made half-yearly as a reward for holding the company’s shares. As a shareholder you can either take the cash or use the money to buy more shares in the company. Reinvesting dividends can dramatically boost returns over the long term – provided the shares go up.

With yields looking good – Shell, for example, has committed to paying a dividend for the next three years – savers may be wondering about investing their money. The problem is, while the possibility of high yields is appealing, this doesn’t tell the full story.

“Income yields show the level of dividends paid as a proportion of the share price,” says Connolly. “The reason why many shares have attractive-looking yields is because their share prices have fallen, rather than because companies have been increasing their dividend payouts. It isn’t a good position for an existing investor to have a high yield on their shares if this is the result of them having already suffered a big capital loss.”

Many companies, and particularly in sectors such as oil and commodities, he says, are under pressure. “It would be no surprise to see some companies cutting the level of dividends they pay. This could, in turn, lead to further falls in their share price.”

Damien Fahy from finance website MoneytotheMasses, says: “Would-be investors shouldn’t just focus on the current yield of a share. They also need to focus on the likelihood that the dividend will be maintained – and indeed increased – year on year. Shell may have committed to paying a dividend for three years, but elsewhere there has been a swathe of companies cutting dividend payments.”

For Dungate the hope to getting a higher return on her money is worth the risk. “I appreciate that investing in the stock market is risky, but I’m willing to take this risk in the hope of getting a higher return. I’m not investing everything I have, and am prepared for the ups and downs.”

Should you take the risk?

While rising stock market yields may make shares more attractive than other asset classes – such as fixed interest, property and cash – you need to be aware of the risks involved.

“Unlike a cash savings account, investing in the stock market risks losing money,” says Justin Modray from finance site Candid Money. “It’s all very well enjoying a healthy dividend payout, but this may be little consolation if stock market falls mean you’ve lost 10% of your original investment.”

If you are simply fed up with the low rates on cash savings but would endure sleepless nights worrying about the prospect of losing money, the stock market is not for you. “It is better to put up with poor cash returns and sleep peacefully knowing your money is safe,” Modray says.

This is a view shared by Danny Cox from adviser Hargreaves Lansdown: “While the yields may currently be attractive, those uncomfortable with capital risk should stay in cash.”

Invest for the long term

That said, if you are happy with the idea of taking on some risk this could be the time to take the plunge.

“Right now the average variable rate cash Isa is yielding just 0.85%,” Cox says. “This makes the yields on stock markets look very attractive. Equally, investors who brace themselves for the ups and downs will look back at this as being a decent entry point. The UK markets are reasonable value, and a long way off their all-time highs – so provide long-term profit opportunity.”

The key is to only invest money that you can afford to leave there for at least five or 10 years – to smooth out any bumps in the market.

“The volatility of the markets may be off-putting for first-time investors, but the increased investment risk does mean that over the long term there is the potential you could achieve greater than you would from a savings account,” says Fahy. “According to the Barclays Equity Gilt Study equities have produced an average return of around 5.5% a year over the past 50 years. However, in that time there have been big market falls as well as rallies.”

HOW TO GET STARTED

If you are investing in the stock market for the first time, you need to tread carefully. Decide what you want to achieve, how long you are planning to invest for, and how much risk you are prepared to take. Does your homework or take advice – visit unbiased.co.uk, a website that helps you search for local financial advisers?

■ Investment funds investing in individual shares after researching a company carries a high risk. Reduce this by investing in a range of shares through investment funds.

■ Equity income funds for those looking to invest in companies with healthy dividends. Equity income funds typically invest in a spread of FTSE 100 companies. Top picks from Tilney Bestinvest’s Jason Hollands include Standard Life UK Equity Income Unconstrained, Ardevora UK Income, and the smaller company-biased Unicorn UK Income fund.

■ Shop via a platform Good for first-time investors, DIY investment platforms resemble an online supermarket from which you can select from a range of investments provided by different companies, but which are purchased and held in one place. These allow you to mix and match funds from a range of managers, plus you can access a wealth of research, information, tips and tools. Remember to look at the service offered as well as any administration charges, dealing fees and any other extra costs. Platforms include Hargreaves Lansdown, Bestinvest, and The Share Centre.

■ Costs Obviously these vary, and the cheapest option will depend on the types of investment you want, and how big your portfolio is. If you invest in funds expect to pay between 1% and 2% in charges. If you want someone else to run a portfolio of trackers for you – and do the asset allocation – Nutmeg is an option. With annual fees of between 0.3% and 1% it may be a good option for novice investors.

■ Use your Isa If you’ve not used your Isa allowance it is worth popping your funds or shares inside this tax-efficient wrapper.

■ Drip-feed your money Reduce the risk of market timing by investing regular premiums on a monthly basis rather than putting in a lump sum. That way if the market falls you simply buys at a cheaper price the following month. You may be able to invest from as little as £25 a month.

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Do you need financial therapy?

Whether it’s anxiety about paying the bills, guilt at spending, or feelings of inadequacy over our income, polls frequently show money to be a leading source of worry, and one of the main causes of rows between couples. Even the rich aren’t immune, according to Capgemini’s annual World Wealth Report, with top concerns for millionaires in 2015 ranging from how they will maintain their lifestyle to whether their offspring will mismanage their inheritances.

So how do we make peace with our bank statements and instead spend the wee hours calmly contemplating whether that car alarm will ever stop? The answer, at least according to some, lies not in spreadsheets and interest calculators, but in financial therapy. A burgeoning field in the US, where the five-year-old Financial Therapy Association counts more than 250 members, financial therapy combines traditional financial advice with a more touchy-feely psychological exploration of what is driving a client’s behaviour towards money.

It doesn’t come cheaply, of course, but financial therapists say we should think twice before rolling our eyes: they claim our emotional issues around money could be the exact reason we don’t have more cash to pay our bills.

They say the way we treat money is influenced less by logic and more by deep-seated beliefs that we are often unaware we hold. We may grow up watching our parents struggle with money and subconsciously develop negative, fearful emotions towards it, for example.

Low self-esteem can lead to the self-fulfilling prophecy that we will never make enough to be comfortable. “The obstacles that keep us from having more and being more are rooted in the emotional, psychological and spiritual conditions that have shaped our thoughts,” writes US financial expert Suze Orman in The Road to Wealth: A Comprehensive Guide to Your Money. “In other words, what we have begins with what we think.”

Financial therapists aim to identify and tackle a client’s psychological “blocks” about money through a mixture of established therapy techniques, such as asking them to recall early memories or write down word associations, and classic financial planning tools such as balance sheets and cash flows.

Practitioners tend to come from backgrounds that include psychology, marriage or family therapy, mental health, social work and financial planning, and what they offer depends on their training. A psychologist won’t necessarily be able to advise on Isas, for instance.

The practice has yet to make it to Britain – although Kristy Archuleta, president of the Financial Therapy Association, believes it is only a matter of time – but financial coaches such as Simonne Gnessen tread similar ground. The co-author of Sheconomics and founder of Brighton’s Wise Monkey Financial Coaching, Gnessen came to coaching via a course in neurolinguistic programming.

A petite woman with natural warmth, she had learned from her earlier, 10-year career as a financial adviser that traditional advice often doesn’t go far enough. “The financial industry tends to work on the basis that people are functional with money,” she says, with a wry smile. “You earn, you save a proportion, you always have the future in mind. In my experience, that isn’t the case and most of us are actually a bit dysfunctional.”

Financial coaching addresses the reasons we don’t always treat money in the way we should, identifying unhelpful patterns of behaviour and challenging attitudes we may have unknowingly developed over the years. Gnessen’s clients’ concerns range from debt to retirement, worries about providing for family to feelings of guilt about “undeserved” inheritances.

The reality of someone’s financial situation often has little bearing on their feelings about it, she says. “I’ve sat down with clients who will never run out of money in their lifetimes – and have the bank statements to prove it – yet I’ve had to reassure them again and again that they’re not going to end up destitute. The main issue from my point of view is whether someone’s money behaviour is supporting or hindering them – and if it’s hindering them, how can we change that?”

Sitting opposite Gnessen in her peaceful mews house office, I tentatively begin to describe my own feelings towards money. It’s possibly the first time I’ve ever discussed the subject from an emotional perspective and as we talk, I realise my attitudes are far from neutral, mainly oscillating between anxiety and an ill-advised recklessness.

Gnessen says she can understand the recklessness – it’s a time-honoured release from the exertion of self-control – but is curious about where the anxiety stems from. The idea someone wouldn’t be at least a little anxious about money is new to me, perhaps highlighting just how deep-seated the attitude is. When pressed, I identify debt, the precarious nature of freelance work and the prohibitive cost of living, but it strikes me that it’s something I’ve felt since the days when I only had my weekly pocket money to manage.

I think of money as an abstract concept, yet it’s inherently bound up with negative feelings. Although we start to unpick the reasons for this, I’m less interested in where the attitude has come from than how it’s holding me back and what I can do to overcome it.

Gnessen believes my worry about money is leading to some poor decisions in how I manage it. The debt I’ve accrued over years of renting in expensive cities and living slightly beyond my modest means is, at under £10,000, far from insurmountable, but it causes me grief. The solution is clearly to pay it off, but it’s not quite happening and Gnessen thinks this is related to my negative feelings about the situation.

I make hefty monthly repayments because they make me feel better initially (I’m tackling this problem!) but on an unpredictable freelance income they often end up leading to cashflow problems and more borrowing further down the line; cue more worry.

She suggests that instead of reacting to the anxiety the debt causes me by trying to pay it off quickly, I should instead focus on a more sustainable goal such as not accruing any new debt. I could then use the money “saved” by making more manageable repayments to build up an emergency pot I can draw on when times are tight, rather than resorting to more borrowing. The point, Gnessen says, is to balance the see-saw of emotions that accompanies the cycle of debt and repayment and encourage calmer, more rational financial behaviour.

Gnessen also thinks I have become too comfortable (in a miserable sort of way) with being in debt and am, inadvertently, ensuring I stay there. She points to the fact I have never allowed my borrowing to escalate beyond a certain level, but have frequently paid it down and then allowed it to climb back up again.

She asks me to imagine myself in a new situation and tell her what having money could do for me. I can only come up with not having to worry about it, which seems pretty good but apparently isn’t positive enough. Positive goals are known to be more motivating than negative ones, Gnessen says.

I’m not wholly convinced by this – wouldn’t there be a lot of rich daydreamers if that were the case? – and I struggle with the idea that worry isn’t also a good motivator. If we didn’t worry about paying bills and keeping a roof over our heads, I’m not sure many of us would go to work at all. Still, I concede that my perceived “reward” for getting out of debt is perhaps not enough of a reward and promise to work on finding a more meaningful alternative.

Talking about money with a stranger feels both exposing and liberating. It’s a subject that provokes strong emotions but we rarely discuss it even with our closest friends. Perhaps financial therapy just offers a much-needed platform to discuss these feelings with someone who won’t judge us. But I think it’s more practical than that.

For me, the soul-searching is interesting but becomes genuinely useful when it identifies patterns of unhelpful behavior. Given our tendency to repeat mistakes in other areas of our lives, I think most of us could benefit from a closer examination of our attitudes to money.

Financial coaching with Simone Gnessen starts from £185 for a two-hour session.

Become a Client of Sparks Corporation Singapore Management Services

Achieve your Financial Goals

Becoming a client of Sparks Corporation is quite easy and is financially rewarding. We appreciate our clients’ great desire to achieve their investment objectives according to their unique circumstances. For this purpose, we endeavor to obtain a comprehensive understanding of your financial requirements and what you hope to gain by committing to an investment strategy with our company.

Without an in-depth and broad vision of your expectations, we cannot build an effective partnership of your dreams and our experiences.

Discretionary and Non-Discretionary Management

We offer two Unique Account Structures which are managed in various ways:

Discretionary portfolio management includes a fee-based service requiring minimal input into the investment decision-making procedure. We will provide you with a list of strategies, each fitted to your specific goals in mind. Through counsel and discussion with your wealth advisor, you will choose a plan that suits your personal convenience.

We commonly accept applications with minimum investment capabilities of $30,000. Our services are fee-based and directly connected to a multi-leveled fee schedule based on the level of investment.

Non-discretionary management includes a transaction and commission-based model designed to incorporate but not limited to variables of asset class, introduction, preliminary guidance and level of capital invested.

Clients making use of our non-discretionary services are encouraged to discuss this choice in detail with his or her wealth advisor before applying for assistance.