For many people, investing may be appealing due to the potential returns it may bring, but with a lot of misinformation, people often get confused, and avoid the topic all together due to the risks involved. However, with professional guidance, it may prove to be a very valuable tool in setting one up for the future.
During an exclusive interview with Express.co.uk, money expert Peter Komolafe gave guidance to those who may be considering investing but just don’t know where to start.
He said: “For anyone in their 30s or 40s that hasn’t started investing, the biggest thing first and foremost is to get started.
“Investing as a whole can seem really overwhelming but I think ultimately it’s very simple. The fundamental principles behind it are relatively simple.”
Mr Komolafe stressed the importance of people going back to basics, and learning definitions and meanings of different investments.
On his YouTube channel Conversations of Money, Mr Komolafe aims to break all of the language down into simple English as a way to help people understand the fundamental principles.
When looking at investing, it’s important for one to “familiarise yourself with the language” and treat it like “learning a new language”.
He explained: “If you went to France and you didn’t know what bonjour meant, you wouldn’t know when to use it or in what context, or what it means. The same thing applies with investing.
“Investing is basically about buying into companies and becoming a shareholder of the company so over the long term If that company grows, you partake in the profits and the share price increase as a result of the profits.”
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Additionally, when looking to invest, it’s important for one to have a goal.
Mr Komolafe asked if the reason is for retirement or whether it is to help pay university fees for a child. There has to be a “particular thing” which is the reason for wanting more.
He continued: “It may sound nonchalant in the beginning, but the reason why you’re investing is going to guide how you go about it.
“Let’s say it’s for retirement and you’re in your 30s right now, the next question is when are you looking to retire. Is it 55 or is it 60?
“If it is 60 then it means you have a 30-year time horizon which means that you get to select specific investment vehicles that will give you the best benefit overall.
“Educate yourself, with books, podcasts and content out there. Getting started is the most important thing.”
Mr Komolafe went on to discuss investing for retirement more specifically and the tools available for those in their 30s and 40s.
Workplace pensions are particularly valuable and are beneficial for those in work. Most people will be invested in one but they may not know.
The government introduced auto-enrolment to help people with their pension savings. It’s a scheme whereby one’s employer has to contribute into a pension on their behalf.
The money saving expert added: “Effectively that is free money, so as long as you’re opted in to your workplace pension scheme you will be contributing five percent and your employer will be contributing three percent. So eight percent of your annual salary will be going into your pension.”
For those in their 30s, Mr Komolafe mentioned the importance of making sure they are invested into things that will work as hard as possible for them. It’s important to know exactly what one’s workplace scheme is offering and if this can be maximised.
He suggested, when speaking to HR, one may benefit from asking questions such as “do you match my contributions?” Instead of just offering the minimum three percent rate some companies may say ‘If you pay eight percent, we will also pay in eight percent.’ “So you have the opportunity of getting free money,” he said.
The main thing for those in their 30s and 40s is to “visualise” what their retirement might be.
Being able to see 20 or 30 years in the future may be hard, but it can be a crucial part of getting the retirement that one wants.
Mr Komolafe concluded: “Try to take a step back and envisage what does your retirement actually look like.
“Do you want to be able to maintain the same level of livelihood as you’ve enjoyed in your working years because the reality is that no one wants to get to retirement and have to downgrade their lifestyle.”Internet Explorer Channel Network