How Investors Can Go for Gold

Editor's Views: What you can learn from Olympians, AIM's winners and losers and how to invest on a tight budget

Holly Black 6 August, 2021 | 10:03AM
Facebook Twitter LinkedIn

Woman with megaphone

Has anyone else been completely addicted to this year’s Olympic Games? The incredible talent and determination of these athletes is mind-blowing, and most of them seem to have a wonderful attitude and camaraderie too, more so than I’ve ever noticed before at a sporting event.

Of course, at Morningstar we couldn’t miss an opportunity to point out the similarities between investing and Olympics, and my colleague Keith Speck takes the gold medal for that particular article this week.

Focus, a long-term view, and more than a bit of skill are attributes that will serve you well in both the sporting and investing worlds. But so, too, does knowing where your weaknesses are. Olympians know which sports they excel at and the strategy needed to reach their goals. Investors would do well to keep this in mind too. An Olympic rower doesn’t suddenly rock up on the 100-metre track, assuming he has a transferable skill. We’ve seen time and again over the years, fund managers make a hash of things when they move out of their area of expertise – from managing a portfolio of UK equities and into emerging markets, for example.

Any investor needs to be honest with themselves: what are your strengths, what’s on your too hard list, and where are your weaknesses? Play to the first, avoid the second, and outsource the last – that’s the way to go for gold.

AIM High

Have you got AIM shares in your Isa? It’s been eight years since they’ve been eligible for the tax-free accounts and taking a look at some of the success stories this week made me wish I’d taken advantage of that. Some of the gains have been truly staggering – although, some of the losses have been pretty frightening too.

AIM often gets a bad rap, dubbed a “wild west” stock market where the stakes are high and the regulation loose. But it’s lazy to brand an entire stock market – not least one that contains more than 800 different stocks – as all bad. AIM has produced some incredible success stories over the years: FeverTree, Asos and Boohoo to name just a few. Yes this is a market where fledgling companies often list, and yes there are penny stocks to be found there, but at the end of 2020, there were also 24 companies worth £1 billion or more.

AIM, then, is like any other investment market – a mixed bag of good eggs, hidden gems and bad apples. But the biggest opportunity of all lies in the fact that it’s so overlooked by the majority.

Investing's Tough Choices

My colleague Robert van den Oever posed the question this week: can you invest on a tight budget? 

This is an interesting one. The proliferation of online investment platforms and apps means you absolutely can invest on a tight budget - some of these companies let you get started with just £1. I love that as a concept because I do not believe that investing is something you do when you're wealthy - it's something you do to get wealthy. Undoubtedly, such companies are helping to democratise investing. 

But should you invest on a tight budget is a different question. And one without a clear cut answer. The earlier you start investing, the better - the longer your money has to grow and compound - we know that, and when you take that strategy, even small amounts soon add up. But there are some caveats to this: investing shouldn't be your priority if you're truly struggling to make ends meet, if you don't have an emergency savings pot built up already, or if you're being at all pressured to do so (whether it's by a salesman, social media influencers, or plain old FOMO). 

As with anything else in investing, it's personal. But it's important to remember that "can" and "should" are very different questions. 

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Holly Black  is Senior Editor, Morningstar.co.uk