Investing can seem daunting, especially if you're new to it. Many people feel held back by the belief that investing requires a lot of time and expertise and is too risky. But these are just myths – and they could be preventing you from achieving your financial goals. 

Below, we break these myths down and show you how easy and accessible investing can be.

MYTH – You need to be an expert to invest

A common barrier to investing is the assumption that you need to be an expert in finance or a whizz with numbers to be successful. Jargon also gets thrown around, which can feel overwhelming and may end up putting you off. But investing is easier than you think.

Vanguard has simplified investing down into four principles that we think can improve your chances of investment success: have a goal in mind; invest in the right mix of shares and bonds¹ for you; control your costs; and invest for the long term.

Investing in the right mix of shares and bonds might seem complicated, but it doesn’t have to be. For example, we offer a managed service where we ask you a few questions about how you feel about risk and, based on those answers, we select a portfolio of investments for you. We manage your portfolio so you don’t need to monitor the market or attempt to make complex investment decisions yourself.

Alternatively, you can opt to select investments yourself but, again, it doesn’t have to be complicated. Instead of buying shares in lots of different companies, you could invest in an index fund², which can hold hundreds, or even thousands, of companies. Or you may want to consider a multi-asset fund³ such as our LifeStrategy range. These are all-in-one funds that combine different types of investments into one ready-made portfolio.

MYTH - Investing requires hours of research

If you’ve ever watched films like The Big Short or The Wolf of Wall Street, you might think that to be a successful investor you need to spend every waking hour researching companies, keeping up with market news and making regular adjustments to your portfolio. 

While some investors may enjoy doing this, paying too much attention to the news and frequently buying and selling investments can cost you in the long run. This is because our emotions can come into play and lead to knee-jerk reactions, such as selling investments when markets fall and then missing out on the subsequent recovery. 

We believe that understanding how you feel about risk and selecting a portfolio that aligns with that, not only saves time but can also give you the confidence that your investments are right for you.

With Vanguard’s Managed ISA, you can ‘set and forget’ as our experts will handle the day-to-day management of your portfolio, making sure it stays aligned with your goals and risk level. This means you spend more of your time on the things that matter to you.

MYTH – You need to pick winners

Vanguard’s founder, Jack Bogle, once said: “Don’t look for the needle in the haystack. Just buy the entire haystack.” 

The “needles” are the few companies whose shares go on to have an astronomically high performance while the “haystack” is the entire index. By buying the whole haystack, you’re essentially owning the whole market.

Different companies inevitably fall in and out of favour, but by owning them all through an index fund, you can reap the benefits from those that are performing well, mitigating losses from those that aren’t.

Picking the right mix of index funds may also seem confusing, so another option is to choose a multi-asset fund, such as our LifeStrategy funds. 

MYTH – Investing is too scary

Some people think investing is too scary and don’t do it out of fear of losing all their money. 

While this risk does exist, it’s worth bearing in mind that investing should be a long-term process. It’s about aiming towards a long-term goal or goals, such as building up wealth for your retirement or saving for a child’s education, rather than getting rich quick. 

You don’t need to have a high tolerance for risk to invest, but it is important to understand what your tolerance is and to align your investments with that. For example, someone with a long-term goal and who is willing and able to accept the risk that comes with investing might allocate more of their portfolio to shares than bonds. This is because shares have historically offered higher returns than bonds over the long term, albeit with greater volatility (or swings in prices) along the way. 

But another investor may be naturally cautious and prefer not to take risks with their money. Therefore, they may have a higher allocation to bonds in their portfolio, which have historically offered lower but more stable potential returns than shares.

The ‘scary’ part is what could happen should you not invest – namely, your savings could lose value due to inflation (the rising cost of goods and services). Inflation reduces the purchasing power of your money and it may mean you don’t achieve your goals as quickly as you hoped. 

Always remember, though, that past performance is no guarantee of future returns and there is a risk you may get back less than you invested.

¹ Bonds are a type of loan issued by governments or companies, which typically pay a fixed amount of interest and return the capital at the end of the term.

² An index fund will often buy shares in every company listed on the index it’s tracking. For example, a FTSE 100 index fund might buy shares in all 100 companies in the FTSE 100. They can only be bought or sold at the end of the trading day.

³ A multi-asset fund is a single fund or exchange-traded fund (ETF) that combines different types of investments, such as shares and bonds. An ETF trades on an exchange throughout the day like a stock and will typically track a specific market, like the FTSE 100.

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Eligibility to invest in a Vanguard Personal Pension depends on your individual circumstances. Please be aware that pension and tax rules may change in the future and the value of investments can go down as well as up, so you might get back less than you invested. You cannot usually access your pension savings or make any withdrawals until the age of 55, rising to the age of 57 in 2028.

If you are not sure of the suitability or appropriateness of any investment, product or service you should consult an authorised financial adviser. Please note this may incur a charge.

Past performance is not a reliable indicator of future results.

Some funds invest in emerging markets which can be more volatile than more established markets. As a result, the value of your investment may rise or fall.

Investments in smaller companies may be more volatile than investments in well-established blue-chip companies.

The Vanguard LifeStrategy® Funds may invest in Exchange Traded Fund (ETF) shares.

ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid- offer spread which should be considered fully before investing.

Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. 

The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds.

The funds may use derivatives to reduce risk or cost and/or generate extra income or growth. The use of derivatives could increase or reduce exposure to underlying assets and result in greater fluctuations of the Fund's net asset value. A derivative is a financial contract whose value is based on the value of a financial asset (such as a share, bond, or currency) or a market index.

Some funds invest in securities which are denominated in different currencies. Movements in currency exchange rates can affect the return of investments.

The eligibility to invest in either ISA or Junior ISA depends on individual circumstances and all tax rules may change in future.

For further information on risks of the underlying funds, please see the "Risk Factors" section of the prospectus on our website. 

Important information

Vanguard only gives information on products and services and does not give investment advice based on individual circumstances. If you have any questions related to your investment decision or the suitability or appropriateness for you of the product[s] described, please contact your financial adviser.

This is designed for use by, and is directed only at persons resident in the UK.

The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information is general in nature and does not constitute legal, tax, or investment advice. 

Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of shares and/or units of, and the receipt of distribution from any investment.

Vanguard will manage your investments in the Managed SIPP and Managed ISA on your behalf. You will not be able to place trades on your own account.

The Manager of the Ireland domiciled funds may determine to terminate any arrangements made for marketing the shares in one or more jurisdictions in accordance with the UCITS Directive, as may be amended from time-to-time.

For investors in UK domiciled funds, a summary of investor rights can be obtained via https://www.vanguard.co.uk/content/dam/intl/europe/documents/en/Vanguard-InvestorsRightsSummaryUKFUNDSJan22.pdf and is available in English.

For investors in Ireland domiciled funds, a summary of investor rights can be obtained via https://www.ie.vanguard/content/dam/intl/europe/documents/en/vanguard-investors-rights-summary-irish-funds-jan22.pdf and is available in English, German, French, Spanish, Dutch and Italian.

Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.

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