Investing as part of a portfolio career
A few years ago I had a go at investing in some shares. I didn’t put much in, but I wanted to learn how to do it, and also have a bit of fun. I made a little bit but lost most of it. Lesson learnt. But with more of us looking to flexible ways of working (and a number of revenue streams) could investing be a suitable sideline for working mums looking to diversify? If you are thinking about dabbling here are a few things you might want to think about:
Choose your platform
It’s no longer all about stocks and shares and the trading floor. There are lots of ways you can invest. Of course you can buy shares in established Footsie 100 companies, and trade them as part of a share portfolio. This means you’ll need an account with a share dealing company and will manage your shares yourself. You can also invest in slightly less risky shares ISAs, where your money is spread across a number of companies and invested on your behalf.
More recently there are crowd-funding platforms such as Crowdcube and Seedr for early-stage businesses, where entrepreneurs ask for investment in return for equity to help them grow their business. In these instances you may need to wait for several years to see any profit (or loss) – you’ll get the money back only when the company is taken over or buys back your shares.
Spread your risk
Unless you can live without the money you’re investing don’t do it. Only invest what you can afford to lose and spread your risk – in other words don’t put all your eggs into one basket. Even if you think it’s the next Uber and going to make you a fortune. Do as much due diligence as you can yourself. Thanks to the internet you can read up about founders of companies, you can question business plans, and get involved in the investor community. It may not prevent you losing your money, but the more research you can do about a new company, the better position you’ll be in to decode whether or not to invest.
Know the lawThere are some incredibly generous tax breaksavailable to investors in the UK – the main two being EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme). With EIS, people can invest up to £1million in any tax
year and receive 30% tax relief. However, they are locked in for a minimum of three years. SEIS is for early stage (or seed) businesses and offers investors initial tax relief of 50% on investments up to £100,000 and Capital Gains Tax (CGT) exemption for any gains on the SEIS shares.
Get an accountant
If you invest and make money (or want to claim tax back) you’ll need to fill in a tax return, which you may not have done before. You’ll also need to pay tax on any return you make on your initial investment.You also need to understand how different platforms work and their respective charges. Some platforms will take a slice of your money if you make a profit from your investments, so it’s worth checking. A commonly used phrase is a ‘carry’. In the case of crowd funding, you’ll only receive a return on your equity investment if the company makes an ‘exit’ in the future, including a trade sale, IPO or share buyback. E-Car Club, which raised on Crowdcube in 2012, had the world’s first successful crowdfunding exit, giving their 63 investors a multiple return on their investment.
Know when to get out
Again it sounds obvious, but set yourself some limits and know when it’s time to get out, rather than gambling and throwing away more money trying to make back your initial investment. It’s tempting to pore over share prices, willing them to recover when all the evidence suggests that they are going to continue to fall. Try to give yourself a cut-off – the amount of money you’re not prepared to lose, or know how far you’d gamble. It may be that the price went up, you missed the sale and it’s on the way down – you need to decide whether it’s worth waiting or selling, but you need to think logically rather than emotionally and understand that sometimes losing a bit of money is better than losing all of your investment.
Have you had any success investing or would you avoid it like the plague? And why are there so few mum investors? Equally if you had an idea for a new business, would you look to crowd sourcing as a way of raising capital and moving your company forward? Let us know what you think…