No savings at 40? I’d start by investing £1k in a Stocks and Shares ISA

The best time to start investing is always now. Starting early gives me the maximum possible time to build wealth inside a Stocks and Shares ISA.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young Black woman looking concerned while in front of her laptop

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

If I hadn’t built up any retirement savings by the time I turned 40, I’d go online and set up a Stocks and Shares ISA right away.

It isn’t that difficult to do. There are plenty of online investment platforms to choose from, including AJ Bell, Bestinvest, Charles Stanley Direct, Hargreaves Lansdown and Interactive Investor. All that’s needed are a few personal details and a debit card, and an investor should be ready to trade.

Taking out Stocks and Shares ISA is the easy bit. Every UK adult can invest up to £20,000 a year in any stock or investment fund of their choosing, and all their capital growth and dividend income will be free of tax for life.

I’d set up a Stocks and Shares ISA fast

Choosing which investments to buy is more complicated. We should all have some cash in an easy-access bank account, to cover emergency spending, but this is no place to leave long-term wealth. 

At age 40, retirement is still at least 25 years away for most people (and possibly more than that). Over such a lengthy period, history shows that money should work much harder if invested in the stock market.

Nobody should invest in shares for less than five years. Such a short timescale doesn’t give investors enough time to recover from stock market volatility. Also, the longer money is invested, the more opportunity it has to compound and grow.

That’s especially so if I reinvest all the company dividends I receive straight back into my portfolio, to buy even more shares.

Being a newbie investor can be nerve-wracking. I’d start with a relatively small sum, say £1,000. Or maybe just £500, to see how things go. The simplest way to invest would be to put the money in a tracker fund that follows the performance of a UK-based index, such as the FTSE 100 or FTSE All-Share.

Funds such as the iShares Core FTSE 100 or Vanguard’s FTSE All-Share Index give investors exposure to a spread of different companies, to diversify and reduce risk. However, at the Fool, we favour buying individual stocks instead. 

I’d buy individual FTSE 100 stocks

We believe that building a spread of different companies can help investors outpace the wider market over the longer run. This is more complicated than simply buying a tracker fund, but should ultimately be more rewarding, we believe. Just remember that capital is not guaranteed, and stock choices could rise as well as fall.

Right now, there are loads of top companies on the FTSE 100 trading at low valuations. This has been a volatile year for markets, but that makes now a good time to enter them.

The big question is working out which stocks to buy from the thousands available. We think this is the fun part. Fool.co.uk is packed full of views and opinions on a huge range of mostly UK stocks. If I had no savings at 40, I’d start right here.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »