Angry Granny Turns DIY Investor to Fight Back Against ‘Rip-off’ Savings Rates
With three children, nine grandchildren and two great-grandchildren Joan, 83, turned to DIY investing relatively late in life when she tired of opening letters announcing that yet again the rates offered by her savings accounts were being slashed; despite having ‘done the right thing’ by providing for herself in retirement she was gradually getting poorer by virtue of having cash in the bank or in underperforming Cash ISAs.
‘My husband bought into as many of the privatisations as he could back in the 1980s; far from ‘telling Sid’ he built us an investment portfolio that has delivered valuable income over the years’
Unfortunately Fred died more than twenty years ago and over the years Joan has been sold a range of savings and investment products in branch that have simply failed to deliver.
‘I think they used to think ‘that old stick’s got some cash squirreled away’, she says, ‘and over the years I have had ‘high income’ this and ‘with profits’ that, but have never really understood the way in which the various investments worked.
I knew that the return I was getting was poor, but didn’t really know what to do about it and if I ever raised it with my bank or building society they would always find a better deal or a special offer to reward me as a ‘valued customer’.
Then, I showed my eldest son a letter telling me that interest on my Cash ISA was being cut to 0.01% and we decided it was time to make a change.
Without spending ages getting to grips with investing or fretting over being exposed to the risk of losing all of my money we have managed to make investments over the last few years that have delivered far better returns than I have had in the past, and I have been pleasantly surprised how easy the whole thing has been.
I know that I can see the value of my investments at any time, and I even discuss them with my friends on Facebook’
DIY Investor asks Joan about her attitude towards savings and investments and wonders if she would have done anything differently if she ‘knew then what she knows now’.
HOW LONG HAVE YOU BEEN A DIY INVESTOR?
‘I’ve only had an account with an online stockbroker for around five years, but I have had a wide range of investments in my name for the last twenty years.
However, in the past I have done little other than decide whether to subscribe to rights issues, or sell my holding.
When I opened an account (with Selftrade) I was pleasantly surprised at how simple they made the whole process and it made me wish that I had done so much sooner.
It was only then that I realised that the investment ‘bonds’ I had been sold in branch were not like the bonds that we started to buy and I liked the fact that I could see the value of my investments all in one place; I certainly didn’t obsess about it, but I enjoyed the fact that I could access my account at any time to see how it was performing.’
WHAT TYPE OF INVESTOR ARE YOU?
‘Growing up, my father was a gambler and it made me realise the true value of money; I feel that I’ve worked too hard for it to fritter it away, so I would never invest in anything that comes with a high risk of losing my money.
Having said that, I do recognise that every investment comes with some risk, I just try to spread it around.
Because of my time of life, I am not looking at a long term investment strategy, I am looking to earn a better return on my money than I can get with the banks and, touch wood, so far that has worked well.
I do not want to be constantly buying and selling stocks and shares, or having to worry about prices rapidly rising and falling; I usually sit down with my son every few months and if there is any spare cash we find an investment that we can buy and hold.’
WHAT ARE YOUR KEY CONSIDERATIONS WHEN MAKING AN INVESTMENT?
‘Because I am looking for income I tend to look for, what I now know are called, ‘fixed income’ investments – mainly retail bonds when they are available.
I currently own six different retail bonds, and as well as paying me more than 6% p.a. they are all worth more than I paid for them.’
I have also learned the benefit of keeping fees and charges as low as possible, so I have also bought some very simple trackers – called exchange traded funds – which allow me to own a little piece of every company in the FTSE 100.’
ISA OR PENSION?
‘I have been lucky in that I have a pension in my own right having worked in education, and I also get a widow’s pension which means that my day to day living expenses are covered.
Times were different then, but we paid our mortgage off quite quickly and although I enjoy travelling and have a good social life, I have always lived within my means.
Although I had been persuaded to save into Cash ISAs in the past, I’d not really considered transferring the shares that we owned into an ISA, even though I’d been paying tax on my investments for many years.
Selftrade made it really simple for me to do so and I was so grateful to Sarah there who was very kind and patient with me and always went the extra mile.’
WHAT HAVE BEEN YOUR BEST AND WORST INVESTMENTS?
‘Because I’ve never chased big returns by making risky investments, there have been few ‘bests’ or ‘worsts’; what I like about retail bonds is the fact that even if the price falls, I can still get my money back at the end of the loan.
Five years ago, I could not have written that answer because no one had ever explained to me in layman’s terms that a bond is just an IOU and that I can get paid guaranteed interest for lending to a company or a government; I don’t think the City wanted people like me to understand that.
The individual shares that I still hold are as a result of privatisations, although many companies have changed names or ownership; even though they are probably still worth much more than when we bought them, I can see that many have lost a lot of value since I transferred them into Selftrade, so perhaps they would be my ‘worst’ investments – I should have sold them and invested where I could get guaranteed returns.’
WHAT ADVICE WOULD YOU
GIVE TO ANYONE CONSIDERING SELF-DIRECTED INVESTING FOR THE FIRST TIME?
‘The hardest thing for me was getting started; I used to bundle up the dozens of letters and statements that I’d receive and then when I saw him, my son would agree that I was not getting very good returns, and then we’d agree to do something about it.
We used to joke about making a start when we got ‘a round tuit’; however, once we did, it was surprisingly simple.
We researched the main investment types that were available and weighed up the potential returns that I could achieve whilst agreeing that I am by nature very cautious about losing money; we found that most investments were relatively straightforward, and those that weren’t are not for me.
Because of my caution, maybe even fear, of losing money, I would never invest in anything that I am offered by telephone callers that I don’t know, but sadly some friends of mine lost money they could ill afford on a property development in Spain.
When I look at the financial stresses and strains faced by my grandchildren it makes me very worried and concerned for their future – student loans, low wages and unaffordable housing; if there is one thing I wish I’d known then is the difference it can make to start investing early for children – even small sums invested over a long period of time can make a big difference.
My advice would be to find someone you can talk to and then give DIY investing a try – its nowhere near as scary as I’d expected and it can actually be rather fun’