You’re already a stock market investor (even if you don’t know it) and here is why you should care

by The Fox

A few years ago it pained me that I did not understand much about how the stock market works, personal taxes and so on. I always felt that the jargon was too much to penetrate and I preferred not to think about it. After all, nobody around me knew much about this stuff, then why should I feel like I was out of the ordinary.

Then I had my son and, although sleep deprived, I started thinking more about this. I had a big responsibility in life now and needed to raise my son the best way I could and try to give him the best chances to live a happy and fulfilled life. I hoped we could offer him love, support throughout his life, quality time together and financial stability. 

I was quite hopeless when it came to the last point – financial stability. So, for some reason (can’t remember why), I started with the end, namely thinking about that old boring subject: pension.

I felt ashamed I didn’t know much about my pension, but had the burning feeling that if I didn’t do something about this I would find myself in old age with little money and I would embarrass my child or even worse, rely on him financially! The horror! So one day I took out all the papers my pension provider sent me over the years (that I never before read), started reading and…yawned…

The language, the information, it all was Chinese to me, I could not understand much. Silly, I thought, I work in tax, I must understand this stuff. In reality I only knew very superficially (from my uni days) how these things work. My shame and horror thoughts above helped me persist in my search and so I started researching, reading, watching videos on YouTube (yep!) and slowly saw the light at the end of the tunnel. 

First aha-moment was to discover (even though I had a vague idea about it) that my pension pot was invested in the stock market and I was an investor, alas without fully being aware of this. 

I had to admit that my partner was right all these previous years to want to invest in the market and I was foolish not to agree with him. I was blinded by fear (of losing all) and did not think I was capable of understanding what was best and how to invest.

Looking around me I realised that a lot of people were like me and more particularly they did not understand or know that:

• That statistically there are more chances of us living to old age than dying before the retirement age, thus it pays to care about the pension.
• If you are an employee and contribute to your employer pension, you are investing in the market, your pension is not invested directly in gold, antiques or any such luxuries and the government will not pay you up to your desired pension amount if your investments do not perform.
• In the UK, and I am sure in any other civilised country, even if you move jobs many times, but contribute to the employer’s pension plan, you can find out the details of each pot you have and merge or track these. If you do not keep track of these pots nobody will do it on your behalf and you might lose money!
• If you retire when the stock market is in a steep decline (called a bear market) and your pension pot is depleted, there are ways to mitigate this risk.
• That if you don’t take your employer match to your pension, you lose that money. At least I understood that and always contributed to at least my employer’s match (aka the money your employer contributes to your personal pension pot, it’s money given separately to your salary). 
• Once you understand a few specific words, you can cut through the industry jargon. Once you do that, you can understand what you are invested in, how that is performing and if you can change anything, depending on your goals and not those pre-set by your employer based on the ‘norm’.
• That each of us has the power to change our pension pot, our investments. I have heard friends say: “I don’t understand this stuff, I am sure my employer knows better than I what to invest in”. 

Now think about it: is an HR department right to set your investments, decide on how to spend your money, how conservative to be with your money, how much money you will need in retirement and so on? If you change jobs, can you trust other people with these fundamental decisions in your life and never think about it?

When you put it that way I am sure it will trigger some though, a feeling that something is not right, that you want to understand this – but then, wait. You are not an investor, you don’t understand these things, the stock market stuff is too complicated, right? Let others decide for you.

Wrong! I want to decide on my future. Together as a family we decided on our financial goals, we’ve researched and understand personal taxes – not in depth, but sufficiently to help us make informed decisions. Most importantly, I personally decided I will not let others think or act on my behalf. It’s all I needed to internalise in order to feel empowered to search, learn, understand and act in respect of my financial future. 

What is your experience? Feel free to write to me and let me know.

Image by Nattanan Kanchanaprat from Pixabay.