Should I be investing rather than saving?

Investing is when you have some spare disposable income and/or savings and you want to do something with that money with the expectation of future uplift (though Mr Financial reminds you your capital is also at risk of decreasing).

That increase or decrease is officially called “the return on the investment” and the return is either from selling the investment in its entirety, capital appreciation/depreciation, and/or dividend income, interest. If you have invested abroad, you also will have currency exchange rates to manage and their effects on reported income.

Should I be investing rather than saving?


You can invest in assets, but Mr Financial recommends that’s only for people with specialist knowledge in a certain area (for example, vintage cars, art, or wine). Most people who are new to investing, go to the stock market. You can invest in bonds, shares, funds, gilts and their myriad sub-categories.

There are so many different types of investment strategies and it’s very important that you structure a method that works for you. With the riskier investments, the returns are higher but there is far more uncertainty. A low risk investment is far less risky – but it might be too safe and making you no more money than if it were sitting in the bank.

A safe way to invest is diversify your risk and get some help and advice. The diversification reduces the overall risk because if something goes wrong, there’s X amount of other investments.

If you don’t want to have to think about money and you’re not fundamentally that interested, Mr Financial recommends that you streamline your financial administration and choose investment vehicles (Stocks and Shares ISAs to hedge fund portfolios) that require minimum work from you.


There is the potential to achieve c.5% return on your investment. Savings rates are hovering constantly at historically low levels like 1.3% or less so it’s very tempting to want to explore the investing route.

However, when you invest, you have to be prepared for the swing to go either way. If your manager has done good due diligence and you’re diversified, you should be confident of a good return; if you ever get emotional about trading stocks, your judgement is clouded so keep it all at an arm’s length.

Mr Financial has 3 rules to urge you keep in mind at all times:

  1. Diversify, diversify, diversify across industries and geographical locations
  2. Greater the anticipated return, greater the accepted risk
  3. If you invest money, you shouldn’t touch it for minimum 5 years, so don’t “invest” as a short-term plan


Many fund managers allow you to invest a regular small monthly sum – typically £25 a month (though a few including M&G will go as low as £10 – which will help build up a larger sum over time, as well as being more manageable for your finances).

You can buy shares directly from providers but for the best deals, it’s better to use a platform. So, choosing the platform should be your first decision. Then you can decide what you want to buy.

You probably will be charged a fee for using the platform and for making the financial outlays to buy the investments. The fees vary and beware of marketing ploys. You’ll also need to pay the company for services rendered in buying the shares on your behalf.

Mr Financial does recommend though that investing in an ISA should ALWAYS be your first port of call (see our page on ISAs and SIPPs). Everyone over 18 has their £20,000 annual ISA allowance – (and the stock market gains are exempt from tax) – and you can choose to use all of this ISA allowance for Stocks and Shares ISA, rather than diversifying across the ISA types.

If you’ve still got money to burn after your annual £20K ISA investment (first of all what’s your secret?) then congratulations to you and have some responsible fun with some higher risk investing!

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