How I invest: from being paralysed by indecision to passing on the investing habit
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Shares Magazine
Five years ago, Lily turned to investing mostly out of frustration. Interest rates were floating around 1%, and her savings were barely growing. In fact, when you factored in inflation, she was losing money.
Her thought process was simple: “This is not good enough”. She hadn’t considered investing as much previously, partly because she was saving to buy a house, and partly because she just didn’t feel that she knew enough. But now, the numbers weren’t adding up and living on the outskirts of London with a family to support, she needed them to.
Getting started and using an ISA
She started by speaking with a friend who had taken the plunge with investing. They recommended a few different platforms for her, and from there, she began researching what to invest in and was hit with a flood of information. In the end, she decided to go with what she knew, and invested in the AJ Bell Adventurous fund as well as some Apple stock. It was a company she knew, she explained, and it felt like a good place to get going. She also became a reader of Shares.
Her new reading habit quickly turned out to be a money-saving move. Knowing that she planned to deal in funds and shares, she had opened a Dealing account. But after reading up, realised that she could have put that money instead into an ISA, and would be protected from capital gains and income tax. Now, she tries to max out her £20,000 contribution each year. Even though Lily isn’t investing with a specific goal, she said she liked the satisfaction of watching the growth and being able to build her wealth.
“It’s not just investing,” Lily says. “It’s also about making the most [of what’s available], depending on where the government is allowing you to make the most.”
Even once she’d made her initial investment, Lily found herself hesitant to dive into the market further. She was reading much more about investing, and was looking for a golden opportunity, and the right time to seize it.
The power of compounding
Compounding is sometimes known as the ‘snowball effect’. The more and longer you invest, the faster that money will grow, making your pot larger at an exponential rate. This is why time in the market is emphasised so often in investing. For example, if you maxed out your £20,000 ISA allowance for five years with a return of 5% after fees, you’d end up with £116,437, with £16,437 of market return. But if you kept that investment going for 10 years, it would become £265,867, with £65,867 coming from the market return.
Waking up to the power of compounding
But she soon realised that she was having a difficult time deciding when that would be. And at the same time, she was learning about the power of compounding, and starting to feel that the waiting was, literally, costing her.
“I lost a little bit of a time. I thought, ‘I’m waiting to see when the right opportunity is.’ But what happened was, I wasn’t investing. There was no compounding happening in, for example, four months because I hadn’t done any investment. Later on you have this pressure mounting on you that it’s financial year end.”
She decided to set up a direct debit to keep the money flowing in, without having to fight the indecision each month, and to give herself relief from facing the April ISA allowance deadline with panic.
Passing on the investing habit
Lily didn’t grow up in a family of investors, and it wasn’t something that they spoke about with her when she was growing up. But she’s making the effort to change that pattern for the next generation. She’s opened a Junior ISA for her child, who will be headed to university in just a few years. Even if they opt for the student loan route, she’s glad it could go towards something else, like a house deposit, a few years down the line.
“I like to tell my child we have to start early. We have to start soon. When you start earning, you have to put some money aside each month, because it is all about compounding,” Lily says.
So far, Lily says her kid isn’t too interested in their own investment journey. To be fair, few 16-year-olds would be. But she hopes with time, the messages will sink in.
She’s kept up on her own education as well, learning about stocks other than the big US names, and focusing more on the UK market. She’s also becoming more comfortable with the market ebbs and flows. This year, she took a leap and purchased a group of UK-based stocks in April’s market dip. “They’re doing pretty good, excellent actually,” she says.
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Hannah Williford: Content Writer
Hannah joined AJ Bell in 2025 as an investment writer. She was previously a journalist at Portfolio Adviser Magazine, reporting on multi-asset, fixed income and equity funds, as well as macroeconomic impacts and regulatory changes...
