E53: What’s missing from your investment portfolio? With Gabriel Nussbaum, Davinia Tomlinson and Matt Batsman

The following is a transcript of a bonus podcast episode of The Pension Confident Podcast. Listen to the episode, watch on YouTube or scroll on to read the conversation.

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Takeaways from this episode

• Active investors are a minority - Only around 35% of UK adults are actively investing outside of pensions and property.
• Investing is skewing younger - 69% of Gen Z (18-28) have invested at some point, compared to 49% of Gen X (44-59).
• Crypto’s volatility cuts both ways - comparable five-year returns for Bitcoin and Ethereum show how cryptocurrencies can move in opposite directions.
• Day trading is a loser’s game for most - up to 95% of people who day trade lose money.

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PHILIPPA: Hi, do you know where your money’s invested? And do you feel confident you’re making the right choices about it? Whether you’re an experienced investor or you play it safe, it’s always worth asking yourself whether your money is working quite as hard for you as it might be.

The Financial Conduct Authority (FCA) reckons most of us are still tending to sit on our cash rather than actually investing it to try and grow it. And even those who do invest may be ignoring investments that could potentially work well for them. So today we’re asking, what could be missing from your investment portfolio? Are you too cautious? Are you too scattered? Or are you just following the herd?

Gabriel Nussbaum is better known online as ‘That Money Guy’. He’s built a following of over 1.7 million across TikTok and Instagram by myth-busting and talking about personal finance in plain English. He’s entirely self-taught, having learned to invest by watching YouTube videos a decade ago.

Davinia Tomlinson is with us, and I’m going to say right now, the poor woman has a terrible, terrible summer cold.

DAVINIA: I’m a frog.

PHILIPPA: She’s the Founder and CEO of rainchq, a financial services platform created to help women build wealth and financial resilience. She’s the Author of ‘Cash Is Queen’, and in her previous work, she spent 15 years in investment management. Our PensionBee guest this time couldn’t be better, Senior Investment Content Manager, Matt Batsman. Hello everyone.

MATT: Hi.

GABRIEL: Hello

DAVINIA: Hi.

PHILIPPA: I want to ask you before we get into any sort of other conversation about investments, what was the first thing you all invested in? Matt, tell us.

MATT: Mine’s quite a fun one. So, my Dad opened accounts for us in Bradford and Bingley, which you’ve probably not heard of -

DAVINIA: I have -

PHILIPPA: building society? -

MATT: you have? -

DAVINIA: retro.

MATT: Very retro and long gone. So those shares went to zero very, very quickly and he ended up paying me back the cash. That was my very first experience as a child. He’d bought those shares in my name and they didn’t last.

PHILIPPA: And he insulated you from the loss.

MATT: He did.

PHILIPPA: Nice Dad.

MATT: He did. I’d say that’s not typical. So yes, thank you, Dad.

PHILIPPA: Davinia, what about you?

DAVINIA: Premium Bonds.

PHILIPPA: Oh yeah, me too.

DAVINIA: Again, retro, but I think they were a Christening gif t from my godmother.

PHILIPPA: Yeah, I had exactly the same. Do you ever get any prizes?

DAVINIA: £25 -

PHILIPPA: fair enough -

DAVINIA: in 30 years.

PHILIPPA: OK.

DAVINIA: The return profile isn’t great, but I have them.

PHILIPPA: OK, Gabriel?

GABRIEL: It was one that I did at the young age of 18, the Lifetime ISA (LISA) product. It was very appealing to me at the time. 25% shiny bonus -

PHILIPPA: sure -

GABRIEL: towards a first-time property, which is what I was going for over the retirement version of the product. And I can confirm that I did end up buying a first-time property last year, withdrew my Lifetime ISA, and paid a penalty because [the property valuation] was over the limit of the Lifetime ISA allowance [of £450,000]. So, it looks like all three of us have some poor first investment choices.

PHILIPPA: Well, that’s exactly what this episode is for -

DAVINIA: yes -

PHILIPPA: it’s learning how to do it a bit better, a bit smarter.

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Who’s investing today?

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PHILIPPA: So, should we start with a few basics, Matt? Because setting aside workplace pension schemes, which are investing, but obviously largely we’re not in control of it, do many of us actively invest?

MATT: About half of people have investments. I think it’s 58% -

PHILIPPA: OK -

MATT: UK adults have invested at some point, but people who are actively investing, it’s more like a third, about 35% [excluding pensions and property].

PHILIPPA: Gabriel, do we know who these people are? Are they young? Are they old? Who are they?

GABRIEL: At the moment, 69% of Gen Z aged 18 to 28 have invested at some point in their lives compared to just 49% of Gen X who are aged between 44 and 59. So it’s skewed very, very young. And I do think there’s a lot of reasons behind that. The main one being social media, the internet, and the democratisation of information around investing.

PHILIPPA: I’ve got to say, that’s really surprised me.

GABRIEL: Yeah. I also think that the platforms have it a lot easier. So young people who are much more, let’s say, tech savvy, much more happy to try things out, are finding that investment is actually much more accessible to this generation than it’s been ever before in history. Go back 20, 30 years ago, my parents weren’t exactly calling up a stockbroker to go and make investments , whereas now [with] a few clicks on a button, you can put £1 in an investment in 10 minutes and voilà, you’re an investor.

PHILIPPA: It’s so true Davinia, isn’t it? -

DAVINIA: yes -

PHILIPPA: Because it was so excluding [people], the process, stockbroker, who’s got a stockbroker? But women we still tend not to -

DAVINIA: we lag - 

PHILIPPA: we really lag -

DAVINIA: yes, definitely. And I think what we see, certainly from a rainchq perspective, is that whilst the appetite is there and women know that they want to do something, they need to do something, they have a sense of feeling excluded from the conversation or feeling like the products that are out there don’t help them to achieve the goals that they’ve set for themselves. And so they do nothing.

PHILIPPA: Is it also about nervousness, about just being cautious?

DAVINIA: Very much so. So, in terms of our behaviours, women are very diligent when it comes to saving, but when it comes to investing, that’s really where you start to see a gap.

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The classic asset mix

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PHILIPPA: Should we just talk a bit about the three big traditional assets that most people would know about, Davinia? -

DAVINIA: yeah -

PHILIPPA: so run us through them.

DAVINIA: You know, top of everyone’s list will be stocks. Everybody knows the stock market. They know about stocks and shares. I think people are familiar with the idea of bonds or fixed income. And then thirdly, they may not necessarily think of it as an asset class, but cash.

PHILIPPA: So Matt, we’re going to talk about strategy later. Is there a useful ratio for the split between those three?

MATT: It’s very variable, this, because the sort of classic idea was this idea of the 60/40 portfolio where you’ve got 60% in equities, which is stocks or shares, and then 40% in bonds or fixed income. The idea being that you’ve got that defensive bit and then you’ve got the growth potential in your equities or your stocks and shares.

But there’s lots of different ways to think about it. There’s the 100 minus your age rule. So, I’m 30 [years old], so in theory I should have 70% in equities. Actually, as we’re living longer, there’s the idea that that needs to be extended. So maybe to say 130, where you’re now holding, again, say take me at 30 [years old], 100% in equities, because I’ve got that time to ride out those market dips.

PHILIPPA: Yeah, the peaks and troughs.

MATT: For sure. But it really depends on you as an individual because no ratio is going to be completely perfect for everyone. It’s going to depend on your risk tolerance and your goals and your age.

PHILIPPA: Gabriel, do you’ve a rule of thumb?

GABRIEL: I don’t have a rule of thumb per se. I’ll take the 130 one because that means 101% of my portfolio should be in equities at the moment, seeing as I turned 29 [years old] two days ago. And I think that those are the kind of figures that can help someone make some quick decisions.

Ultimately, the way that I’ve always liked to go about it, or kind of speak about it online, is start somewhere, start small, start in a place that you feel safe, and you’ll learn on the job, if that makes sense. So, as you invest more and start doing it over a longer period of time, you’ll start to understand where your risk tolerances lie, whether you want to be a little bit heavier into equities if you’re a bit younger, that obviously is something that makes maybe more sense.

Or if you’re completely unsure, there are places like robo-investors where you answer a few questions and a portfolio almost gets built for you based on your answers and appetite towards risk. So, you don’t have to know those numbers, those percentages. You’ll get someone to do it for you in exchange for a slightly higher fee.

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‘Reckless caution’ and inflation

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PHILIPPA: Should we talk a bit about the people who aren’t doing this at all, Davinia? Because I mean, as we heard from the FCA, the Financial Conduct Authority, lots of people are just sitting on their cash and it’s just sitting in a bank account, in a savings account. So, tell us why that’s not necessarily a great idea.

DAVINIA: Obviously, we’re much more familiar with the idea of inflation. You don’t need to be an economist to understand that, every day that your money sits in an account not accruing or growing any interest, that it’s losing value.

PHILIPPA: Yeah.

DAVINIA: And I think for those of us that hold all of our money in cash savings, whilst we, from an intellectual perspective, we can recognise “Gosh, there’s perhaps a better place for me to put my money”, we have this inertia. Pressure about doing anything at all. And I think it’s inflation that’s the biggest risk. And there’s this phenomenon known as ‘reckless caution’, which is where we think of ourselves as doing the right thing, the best, the safest thing. But actually the recklessness creeps in from the fact that you’re sitting the money there doing nothing when it could be somewhere else. So, there’s a real opportunity cost associated with that lack of agency and lack of action.

PHILIPPA: It’s a really interesting way to look at it, isn’t it? Because you wouldn’t consider it reckless at first thought to think -

DAVINIA: right -

PHILIPPA: “I’ve just got my money stashed, I’m not going to lose any of it” -

DAVINIA: exactly -

PHILIPPA: but actually, as you’ve rightly said, with inflation, you really are.

MATT: It’s a form of risk in itself, inflation risk.

DAVINIA: Very much so.

MATT: But you don’t think of it that way. You just think of the investment risk of the danger of losing your money that way -

DAVINIA: correct -

MATT: but you’re going to lose it slowly if it gets eaten away by inflation and your money doesn’t have the same spending power.

GABRIEL: It’s a really unfortunate side, I think, of investing in the UK specifically. For years, there have been disclaimers and warnings against investing products, but they’ve never highlighted the risk that you just mentioned -

DAVINIA: right -

GABRIEL: of savings -

DAVINIA: inflation risk -

GABRIEL: or leaving money in the bank. No one ever says, “Beware, your money is being eroded by inflation”. It’s always “Beware, capital at risk with investing”, which I think has turned us into a nation of savers. We’re very good at saving. We love a rainy day, but we’re too good at it.

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Home bias and diversification

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PHILIPPA: We do like what we know, don’t we? So British investors tend to stick with British stocks. We know the company names that we’re familiar with. But it’s not a great idea, is it?

GABRIEL: This is the idea of diversification. So, if you’re new to investment, this is a word that you probably want to have stapled in the back of your mind. It’s the idea of spreading your risk across different places. You might think to yourself, “Well, if I’m buying a few different companies that I’ve heard of, in the UK, ones that maybe I use every single day” -

PHILIPPA: yeah -

GABRIEL: “then isn’t that good enough?” But in and of itself, for example, just investing into UK companies is a lack of diversification because the UK market is quite correlated. All the companies inside of the UK react to UK news and UK economics. It’s the same for a lot of people.

I think one of the most popular funds to invest into these days is the S&P 500, which is the top 500 firms in the US. It’s been on an incredible run over the past couple of decades, but again, only investing into US companies and US stocks leaves you the risk of, well, “What happens if something in the US changes and all of those companies are affected?”

So, I like to tell people diversification is your best friend. The entire globe is available to you, not just maybe a company here or a company there. You want to look at things maybe like ‘funds’ that can buy multiple companies with the click of one button.

PHILIPPA: Yeah, because it’s a bit to do with, I think, the way the media talks about the stock market. They say “the stock market”, we think the FTSE, don’t we? -

DAVINIA: yes -

PHILIPPA: we think [of the] UK.

DAVINIA: You think it’s a singular thing.

PHILIPPA: You do. If this isn’t your area, quite understandably, without education in this, you think that’s what it is. But as Gabriel says, stock markets worldwide behave completely differently to each other. There’s no universal, “This is how the stock market is doing right now”.

GABRIEL: Yeah, absolutely. I mean, take the FTSE that you’ve just explained. So again, for people who don’t know, that’s the UK stock market containing some of the UK’s largest companies in a big basket that you can buy again with a click of one button -

PHILIPPA: the names you’d know -

GABRIEL: BP, I assume Shell, Rolls-Royce, those kinds of companies. But for years, it didn’t do too well. Actually, I think last year was one of its best ever years [since 2009]. It outperformed even the US stock market. But if you were one of those people that were all in on the UK over the past decade, you would’ve lost out to a lot of growth from the US. And then vice versa, if you weren’t in the UK [last year], you would’ve missed the growth in the UK. This is all to basically say for people that are a bit confused about this, spread your bets.

DAVINIA: Don’t try to time the market, right? So that diversification helps by just making sure that you always have a good mix and you’re never too concentrated in any one territory, asset class, or risk category.

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Bonds explained

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PHILIPPA: Gabriel, tell me about bonds. People know the word. I think a lot of people don’t really know what bonds are.

GABRIEL: Bonds, there’s a lot of terms given to bonds. You might have also heard of things like ‘gilts’ in the UK, and bonds are like a slightly more secure way of investing your money into a company where instead of buying a share or a stock inside of the company, you’re essentially taking on debt.

So, a company wants to borrow more money, they can put that out as bonds. You buy that and in exchange you get an ‘IOU’. They’ll say [that] we’ll pay you a certain interest rate on that bond for as long as it’s kind of held. And it’s not just companies that do this. The government does this, and they’ll offer you a rate in exchange for that. They’re more secure than buying an equity because an equity doesn’t guarantee you a rate of return. But over a long period of time, historically, it’s averaged higher rates of return than bonds have.

So again, this is all about that little seesaw in your head of risk and reward. Are you more cautious and therefore want to lean more into having bonds in your portfolio or are you someone who’s a bit more risk-happy, wants to go a bit more aggressive, maybe has a longer time horizon ahead of them and wants to put more of the portfolio into equities or stocks.

PHILIPPA: Yeah, I mean, Davinia, obviously your audience is mostly women. I’m wondering whether this isn’t quite a nice stepping stone for women who’ve thought, “Actually, I’ve just got everything in cash because I know where I am with cash” -

DAVINIA: yes -

PHILIPPA: “and, investing directly in shares, in equities, that sounds quite high risk. How on earth do I pick those?”. Bonds, it’s a way to get there.

DAVINIA: It’s a great segue, definitely. And it provides a level of certainty around what that return profile is going to be because they’ll tell you upfront -

PHILIPPA: yeah, reassuring -

DAVINIA: what rate of interest you’re going to receive in exchange for your investment.

PHILIPPA: And you know how long your money is going to be tied up for.

DAVINIA: Exactly.

PHILIPPA: Yeah. So, one year, two years, three years, whatever. You can make a choice.

DAVINIA: Yes.

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Alternative assets and crypto

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PHILIPPA: Should we move on to alternative assets? I mean, there are so many things that you can invest in. We don’t have time to get into them all. Who would like to give me a potted explanation of what alternative assets are?

GABRIEL: I mean, alternative assets, as you can probably imagine, are just other things that you can invest in outside of the conversation that we’ve already had -

PHILIPPA: such as? -

GABRIEL: Pokémon cards? Should we start there? I mean, we can have a really long discussion about that. I was more Yu-Gi-Oh growing up anyway, so I clearly missed out on that trend.

But like, I think that’s a great way to kind of start the description of what alternative assets can be. I mean, people invest in real estate. Private equity, you might have heard, or angel investing. The idea of investing in companies that aren’t listed on the stock market. A little bit harder to access without large amounts of capital, which is just a fancy way of saying “lots of money”.

PHILIPPA: Yeah.

GABRIEL: One more that’s often spoken about is commodities. Commodities, just think about physical assets: gold, silver, oil, wheat, orange juice, lemons.

DAVINIA: Yes, lemons.

PHILIPPA: Everyone talks about crypto. Let’s talk about that. The first thing I’m going to say about it is: it’s not regulated.

DAVINIA: No.

PHILIPPA: So, this is a Wild West market before we say anything else about it. But probably the best place to start - is what is it?

GABRIEL: That’s a very good question. And I think some people are still trying to figure out what cryptocurrencies are. But the most famous ones that people have probably heard of are things like: Bitcoin, Ethereum, Dogecoin might have been one that came to the -

PHILIPPA: yeah -

GABRIEL: forefront of people’s minds a couple of years ago -

PHILIPPA: yeah, last year -

GABRIEL: it had this moment where it skyrocketed and then crashed. These are digital assets, kind of digital versions of money that are ‘decentralised’, meaning they don’t belong to any one nation, and quite often they’re not backed by anything. A lot of them are traded purely on demand and supply. They don’t really have an underlying value asset like the currency we’ve in this country, which has a large amount, I think, of gold stored somewhere underneath a certain bank in central London that kind of backs what the currency is actually worth. It rose to popularity, I think, increasingly around COVID-19. More people had a bit more time and it went through this kind of huge boom period where cryptocurrency values went skyrocketed high. A lot of people then kind of bought in at high points and therefore probably lost a lot of money. It’s a very, very high-risk volatile asset. That a lot of people are interested in. But I think for the everyday person looking to kind of grow their money in a long-term attitude, it might not be worth it. I’ll be transparent. I have about half a percent of my portfolio in some crypto.

PHILIPPA: Do you?

GABRIEL: I do. It’s just this idea of diversification. I don’t think I’ll ever go more than that kind of percentage of my entire portfolio.

PHILIPPA: And as you say, you’re 29 [years old].

GABRIEL: I’m 29 [years old]. Yeah.

PHILIPPA: So, you’ve got time to play with that risk -

DAVINIA: you’ve got time -

GABRIEL: Exactly. And I’m happy for that money to drop to zero.

PHILIPPA: Davinia, what are your thoughts?

DAVINIA: I think the real danger is that for people who are, I don’t know, seduced by the hype -

PHILIPPA: yeah. And there’s so much -

DAVINIA: yeah.

PHILIPPA: Yeah.

DAVINIA: That you could end up taking decisions that are against your best interests because you don’t have a good understanding of what your risk appetite is, what your risk tolerance looks like. You don’t have a good understanding where cryptos are concerned of the entire investment process. So investing is one thing, but then how do I liquidate that investment when I want to get the money out?

PHILIPPA: Matt, give us some numbers, because Gabriel’s - I mean, there’s been money made, no question.

MATT: So, five years ago, if you’d put £100 into Bitcoin, you’d be on £179 now. So, the 79% increase in those five years -

PHILIPPA: in five years -

MATT: is very impressive. But, and this is obviously the caveat with crypto, if you look at Ethereum, which is another one of the big cryptocurrencies, over the same period, you’d be down 24%. So yes, your money could go to zero overnight in theory, which is less likely with something like a stock or a share.

GABRIEL: I think the other thing to mention with something like crypto is it’s a roller coaster. So, what you said before were kind of like the numbers over the past five years. But what isn’t told in that story is what’s actually happened during that period. Your money might have dropped as low as half, it might have gone up as high as triple. And how much can your heart take at night -

MATT: true -

GABRIEL: when you’re going to sleep and you’re thinking about where your money is? I think this is a large part of investments that people don’t often talk about, the emotional side, and how much can you actually manage in terms of risk.

PHILIPPA: I think that’s the thing we probably can usually say about alternative assets, isn’t it? Volatility tends to be a characteristic of most of them. This can be good, it can be very, very bad if it’s money you can’t afford to lose.

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Gold, oil and ‘flight-to-quality’

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PHILIPPA: What about some other more traditional but still alternative investments like gold? I mean, we had a bit of a gold rush, didn’t we, last year?

MATT: We had a big, big gold rush so that the spot price of gold, which is sort of how you measure it, I think it’s an ounce of gold, reached an all-time high and then it did it again and again.

PHILIPPA: But it wasn’t completely clear why it was so very hot -

MATT: no -

PHILIPPA: was it? -

MATT: and gold is a funny one because it often goes up in times of uncertainty and as a sort of defensive asset.

PHILIPPA: The ‘flight-to-quality’, they call it.

MATT: Yes, exactly. So, we might have expected gold to have gone up when, say, the volatility started with the war in Iran, and instead gold actually fell.

PHILIPPA: Yes.

MATT: I imagine because it was correcting from that massive all-time high that it hit.

PHILIPPA: Oil, that’s another one completely affected by global conflict.

GABRIEL: Yeah, I’ve got some in my car at the moment. So, there’s a small investment.

PHILIPPA: You hang on to that.

GABRIEL: Yeah, well, it diminishes actually by the day. Every mile that I drive, for some reason, oil -

PHILIPPA: it’s fluctuating by the day, isn’t it? You hear it every day. It’s up, it’s down. It’s extraordinary.

GABRIEL: Yeah, it’s a crazy ride. And I think all of this conversation, I suppose, stems back to diversification. If you’re only invested in oil, you might have had a great year. But if you’re only invested in gold, after the hype had kind of cooled down, you might have had an awful year.

However, if they made up a small part of your portfolio alongside all the other things that we’ve spoken about: bonds, equities, premium bonds, a little bit of cash as well, having some Pokémon cards on the side. When you have that big spread, hopefully on average you’re hoping that things do trend up and you can kind of mitigate those risks against each other.

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What the panel invests in

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PHILIPPA: So, I think it’d be useful to know what you three are invested in. I mean, I don’t want to get too personal about this. And obviously this is completely about the age and stage you’re all at. And your own level of wealth and your own appetite for risk. So, we’re not for a second saying this is what people should do, but I’d be really interested to know, can you give us a bit of an outline, Davinia?

DAVINIA: For me, I’m a Mum of two in her forties. I’m invested in property. So, I have a flat that I rent out in London. I’m also invested in basically a collection of tracker funds. So, for me, I’ve got S&P 500, as I said, FTSE 100, I’ve got MSCI World, which is another, you know, collection of global equities.

PHILIPPA: So, you’re investing right across all the way around the world -

DAVINIA: correct -

PHILIPPA: in equities.

DAVINIA: I suppose my portfolio is probably 3/4 equity and 1/4 bonds.

PHILIPPA: Gabriel, give us an outline.

GABRIEL: Well, I’ve already alluded to the fact that I’ve got a very small percentage in crypto -

PHILIPPA: yeah -

GABRIEL: that just sits on the side ticking along, but I’ll kind of speedrun my way through the rest of it. So, the majority of my investments are in my Stocks and Shares ISA, focus purely on equities. And again, I go for global track funds. That’s all I’m interested in. I call myself a boring investor. I’m not here to try and beat markets or pick winners or think that I’m smarter than people that have been in this industry for decades on decades and still can’t beat markets over long periods of time.

I’m more than happy to just buy a global market, not bet on any one country, one industry, and just allow for that to hopefully trend upwards over a long period of time.

The other main one is probably my pension. Now, people don’t really talk about pensions as their investments, but I think that it’s a really interesting, I guess, dynamic in the UK. When I go to someone, “are you invested?” They go, “No”. I go, “Do you have a pension?” They go, “Yeah”. I go, “So you’re invested then”.

PHILIPPA: But this is a personal pension you’re talking about, not a workplace pension.

GABRIEL: No, so I’m self-employed. So, this is through a personal pension that I invest into every single month.

PHILIPPA: Matt, tell us.

MATT: So, the majority of mine is in my pension, so I’m in a 100% equity plan with that. So that’s full on, all steam ahead, going for growth again. And like Gabriel, I’ve got a couple of decades to go before I can touch that.

PHILIPPA: So, you’re going to ride out the peaks and troughs. You’re not unduly worried when you look at your balance and you see some volatility, you’re calm?

MATT: For sure. And I think comes with the experience of having seen things fall.

PHILIPPA: It’s a bad moment, isn’t it?

MATT: Very. My first experience with that was the start of the invasion of Ukraine in 2022. So, I saw all this, what I thought was money, being wiped off the value of my pension.

PHILIPPA: You think of it as your money, money you’ve got -

MATT: yeah -

PHILIPPA: and then suddenly you haven’t got it.

MATT: Exactly. But it was, you know, back up by a couple of months later because that’s what markets do, they go up and down. So, most of mine’s in my pension. I then do have a Stocks and Shares ISA. I’ve got the FTSE 100, I’ve got the S&P 500, I’ve got the MSCI World Index.

PHILIPPA: So alternative assets?

MATT: To an extent. So short selling, which is effectively betting against the market to see if you can predict when stocks or other assets might go up and down.

PHILIPPA: High risk?

MATT: Extremely high risk. Not something that people who have never invested before should probably do.

PHILIPPA: And it’s to be money you’re prepared to lose.

MATT: Absolutely.

PHILIPPA: I guess if you can afford to lose a little bit, you do learn from the experience.

MATT: Yes. And I’m slightly concerned that the lesson I’ll learn is don’t ever do this again.

PHILIPPA: Don’t invest in that again.

MATT: But in the meantime, yeah, it’s just a bit of fun.

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What they panel would never touch

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PHILIPPA: I mean, that does bring me to, have any of you got something you categorically wouldn’t touch?

GABRIEL: For me, day trading. I don’t see that as an investment.

PHILIPPA: Just explain how that works for people who don’t know.

GABRIEL: It’s pretty similar to general investing that we’ve been speaking about, but it’s more things that you’re trying to buy and sell actively. Day trading is one way of saying it. Some people trade over weeks, like they might hold an asset for a few months and try and sell it and make a quick profit -

PHILIPPA: so, it’s short-term investing -

GABRIEL: short-term, some people are doing it by the second. Literally, they’re trying to buy something and sell it straight away because they see the direction that it’s going in. For me, there are professionals that are paid huge amounts of money that sit in very tall buildings in the centre of London -

PHILIPPA: with a lot of technology -

GABRIEL: with a lot of technology that are doing this and struggling. I think that the numbers at the moment are 85% or even 90% of people lose money [day trading].

PHILIPPA: Is there anything you wouldn’t touch?

DAVINIA: I wouldn’t do any more real estate, residential.

PHILIPPA: So, you wouldn’t do it because?

DAVINIA: Far too volatile. I think the liquidity risk, associated with wanting to get the money out of the property when you want to sell, is far too high for me.

PHILIPPA: It can take months to get your money out.

DAVINIA: Exactly.

PHILIPPA: OK. Matt, how about you?

MATT: I think the things I guess I’d avoid would be things that don’t fit with my values as an individual. So very much the - I’d lean towards the ethical side of things where I’d want to invest in things I think are good for the planet and good for society rather than things that I’d personally think aren’t.

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Biggest investment regrets

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PHILIPPA: I do have to ask you if you’ve ever had a really bad, bad experience. Did you ever really pick a bad thing and wish you hadn’t?

MATT: That’s a good question. Because even in the short selling, I’m talking about pounds -

GABRIEL: 74p down today -

MATT: Yeah, exactly. Yeah, I had a short on an easyJet stock that didn’t pan out in recent weeks -

GABRIEL: didn’t take off -

MATT: nice -

GABRIEL: sorry, I had to -

MATT: really, really good -

GABRIEL: yeah, I actually don’t like myself right now.

PHILIPPA: Yeah, I think, you’ve let yourself down.

MATT: but otherwise -

PHILIPPA: so you were glad you did not have any serious money invested in that?

MATT: Oh yeah, definitely.

PHILIPPA: Davinia, worst mistake?

DAVINIA: Attempting to invest in individual shares during COVID-19 when people had a lot of time on their hands -

PHILIPPA: yeah -

DAVINIA: and I was at home. I think Deliveroo had just floated [on the stock market] -

PHILIPPA: OK -

DAVINIA: I put a lot of money into Deliveroo thinking, “Oh, this is a good time, people are at home, we’re ordering food” -

PHILIPPA: yeah -

DAVINIA: they bombed quite quickly.

PHILIPPA: Isn’t that interesting?

DAVINIA: And they never recovered, really.

PHILIPPA: Because it’s tempting, isn’t it? People say “Invest in what you know” -

DAVINIA: right -

PHILIPPA: and you think, “I love Deliveroo, I love M&S”, whatever it might be -

DAVINIA: exactly -

PHILIPPA: “I know this company, I’m firmly behind it, lots of people must feel the same way” -

DAVINIA: yes -

PHILIPPA: “it’s going to be a dead cert”. High risk, picking a single stock.

DAVINIA: And I still love Deliveroo. Give that disclaimer. I'm a big customer.

MATT: I’m surprised.

PHILIPPA: And other delivery - food delivery services are available -

MATT: they’re available, but yeah, considering how much I use it, I’d have thought those shares were doing very well -

DAVINIA: right? -

PHILIPPA: just goes to show! -

MATT: that’s a surprise -

DAVINIA: and maybe it proves that -

PHILIPPA: it’s a more complicated business? -

DAVINIA: the price that they listed at was so - the premium was so high, or they were so expensive relative to their value, and that’s why they never recovered.

PHILIPPA: Yeah.

MATT: Listing ones is a really interesting one where we’ve had SpaceX really recently where that sort of flew up at the start. I had a friend who went into that, did really well, and then he thought, “Oh, I’ll go back in and see what happens”, and it went down.

PHILIPPA: I mean, that’s a perfect example actually. AI stocks with the flotations, these companies, very, very high-tech companies coming to market this year. Lots and lots of press coverage. Lots and lots of social media coverage about them. Quite tempting to think, “I’ll just pick one. I love that. I’m going to do that”. Gabriel, tell me why that’s the thing you need to be cautious about.

GABRIEL: I think headlines and news have affected how especially young people invest. You should try and remove as many emotions as you can from investing. And so, when you’ve your heart set on this one company that you believe is going to kind of reach the moon and transform your portfolio, the likelihood is: probably not.

PHILIPPA: I haven’t forgotten that Gabriel has yet to tell us what his worst investment was.

GABRIEL: Very good question. I'll probably answer that with what I spoke about right at the beginning, which was my first ever investment of the Lifetime ISA product. Now, it’s actually changing in April [2027], so I should make people aware of that. And it's a product for people between the age of 18 and 39 to invest all towards either a retirement or their first-time property, and the government adds a 25% bonus on top of whatever you put in, up to £4,000 you can put in. So up to £1,000 bonus. Now it’s a, I have to say, it's a brilliant product and I actually love it, and it’s basically what inspired me to start investing in the first place because of that attractiveness to a bonus -

PHILIPPA: yeah -

GABRIEL: the reason why it was my worst investment is because if you live in the South East, buying a first-time property under £450,000, which sounds like quite a lot of money, is becoming less and less realistic, especially as people become older and older before buying their first-time property. They might have a family already by the time they get around to first-time property, meaning that a studio apartment, um, in Zone 73 might not quite work -

PHILIPPA: yeah -

GABRIEL: which might come in under that price. So what I’d say the caveat is, if you are 125% confident that your property’s going to come in under that amount, look into that product. If you’re not sure, really read the terms and conditions and make sure you understand how that product works. Because for me, what actually ended up happening is I had to actually pay about £2,000 out of that account as a penalty back to the government -

PHILIPPA: painful -

GABRIEL: because I wasn't using that money for what it was intended to be used [for], but I needed the money to pay for a deposit. Because obviously you need every penny to your name to be able to afford property these days.

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Regulated advice, robo-advisors and AI

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PHILIPPA: That brings us very neatly to that question that I wanted to discuss around advice and understanding, thoroughly understanding what you’re investing in. Back in the day, people had financial advisors. You had to have a person and you probably had to pay them to get decent advice. But things are different now. You talked about robo-advisors, Matt?

MATT: Yeah, definitely. So that’s the idea where you’re filling in a risk profile or questionnaire with a platform and it designs you a portfolio tailored to your preferences or risk tolerance. So that’s definitely an option. And obviously, there’s a lot of people using AI for the same purposes -

PHILIPPA: yeah -

MATT: which is fraught with its own risks as well - the advice could be bad, it could be wrong. AI can make mistakes, it can hallucinate. But it can also be a good sounding board, and it can help you test ideas and find resources to also learn. So risks with all of the above.

PHILIPPA: AI. It’s interesting, because it does have a use. And what would be your tips for using it for this purpose as safely as you can?

GABRIEL: I’d purely use AI as an education board. I wouldn’t use it as a decision-maker, and I wouldn’t use it as a researcher. I’d use it to ask questions on terms you don’t understand, to understand broad things, if there’s large documents you’re potentially trying to break down and synthesise, they’re very good at that.

But I don’t think it’s at the point yet where I’m going to allow it to make decisions for me - I’ll let it explain things and have a back-and-forth conversation with it, but ultimately the decision has to rest with you. I’m sure in a year probably from now it’ll be far more developed than it is today, but real caution around it. It’s a brilliant tool, but treat it like a tool.  

DAVINIA: I agree. I think there’s a real risk that people become overdependent, and have these parasocial relationships with this inanimate tool -

PHILIPPA: yeah -

DAVINIA: it’s useful as a guide, useful to inform, but it’s important [for] people [to] do their own stress-testing and double-check the information they get.

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Golden rules to start

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PHILIPPA: I’m going to ask you all for a golden rule for someone who has just come into this fresh, thinking “This sounds interesting. I’m a little bit scared about it”. Golden rule, Matt.

MATT: I’m going to hedge as any good investor does and diversify across. So, if you’ve never invested before, as Gabriel says, get started. Put a pound in an account, see what it does. Just make an action, take, do something that means you get started. If you’re already investing, you’re sort of early on, then I think mine would be don’t panic or make a knee-jerk reaction when you see things start to fall.

PHILIPPA: Davinia?

DAVINIA: I’d say, just to echo what you’ve just shared, start early, start small, and take a long-term view.

GABRIEL: Start with habit over starting with logic or amount. Just start with literally the habit of every month I put £5 into an account that invests money and I buy an investment. And I’m just going to continue doing that for however long until I can afford to do more. Because the habit is ultimately what is going to probably transform and change your entire financial life.

You’ll never earn enough. You’ll never know enough. You’ll never feel ready to start investing. I wasn’t. You just at some point have to just go, “OK, I’m gonna, I’m gonna do it”.

PHILIPPA: I think these are excellent tips. Thank you very much, everyone. Really, really great tips.

GABRIEL: Thank you. 

MATT: Thank you so much for having us.

PHILIPPA: If you’ve found this episode valuable, please do subscribe to The Pension Confident Podcast so you never miss an episode. Next month, we’re going to be discussing how to build generational wealth. Tune in to find out more. And as a reminder, anything discussed on this podcast shouldn’t be regarded as financial advice or as legal financial advice. And when investing, as we’ve said, your capital is at risk. Thanks for being with us.

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Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.