This article is the latest part of the FT’s Financial Literacy and Inclusion Campaign
My best friend and I have had countless conversations over the years about life, the universe and everything. But this week, we had our first proper chat about investing.
Yes, we’ve had money conversations before — including plenty about property — but never about the nuts and bolts of investing in the stock market. So why has it taken this long?
If you’re also in your 40s, the chances are you might have come into an inheritance, or are expecting to receive one. The rising number of families caught in the inheritance tax net is prompting older generations to pass money on sooner, in the hope that they will survive for seven years after making the gift and reduce any liability.
Even if that’s not the case, many people in their 40s find they can afford to invest in a much more meaningful way, as their earnings increase and expenses (such as the cost of childcare) hopefully recede. Nevertheless, there is definitely an investment knowledge gap at work — and I’ve launched a new FT podcast series this week in an attempt to fill it.
Sitting around my friend’s kitchen table, it felt a bit strange hearing my “work voice” explaining what’s been going on in the US stock market over the past few weeks (isn’t it funny how you can know people so well for practically your whole life, yet often have very little idea of what they actually do all day in the office?)
The Magnificent Seven — some of the biggest and best-known US companies, which dominate global market indices — have not been looking so mighty after worries about their future growth prospects caused steep share price falls at Meta and Tesla in particular. One of my contacts joked this week we should rename them The Magnificent Five.
Nevertheless, my friend had never heard this term. Nor had she heard of Nvidia (to the uninitiated, I agree the AI chipmaker does sound like a face cream) even though these seven stocks account for a growing chunk of passive funds favoured by hands-off investors.
As someone looking to take a more active interest in investing and securing her financial future, she wanted to know more — but here we run into two problems: finding the time and finding the inclination.
Over the years, I have noticed that the cash rich are usually time poor. We are so busy earning money, it’s often a struggle to find the time to look after it. This can result in our finances being neglected rather than optimised.
Even working in the financial world is no guarantee of knowing what to do with your personal finances. Neither is being born into a wealthy family, where money conversations are often taboo. But asking for help can also be difficult, as we fear looking stupid for not knowing.
If you do take it upon yourself to learn more, you then run into a third problem: financial jargon. Over the years, I have learned how to speak the language of finance, and the new Money Clinic podcast format I’ve come up with translates some of the key terms investors are likely to come across into more human and relatable information.
Called The Five Minute Investor, our first episode in a series of eight shows dropped this week on the Money Clinic feed. Each week, I’ll be challenging a well-known FT expert or special guest to explain concepts like the power of compounding, investment yields, liquidity and price/earnings ratios in a way that anyone can understand, giving practical and tangible examples that will hopefully lead to more “penny drop” moments for investors.
Katie Martin, the FT’s markets commentator, has kicked things off admirably this week with a five-minute masterclass about the Magnificent Seven. As she notes on the episode, David Kostin from Goldman Sachs says the important thing to remember is that by the end of The Magnificent Seven (the 1960 film of the same name) four of the seven are dead.
Early feedback suggests that people like short podcasts. My hope is that people who think investing might not be for them will find it easier to give it a whirl and fit it into their everyday lives.
Educating yourself about a new topic can feel daunting, but technology is fuelling the trend for micro learning. You might have used apps like Duolingo, which help you to learn a language in small bite-sized daily chunks. And the rise of social media platforms (mostly owned by those Magnificent Seven companies) means short-form video content about money and investing has exploded in recent years on Instagram, TikTok and YouTube.
Critics might argue that this kind of explainer content is dumbing down, but I see it as a less off-putting entry point. We encourage listeners who have enjoyed our Five Minute Investor shows to listen to longer ones from Money Clinic’s back catalogue, and provide free links in the show notes to relevant FT articles as part of our wider financial literacy mission.
On this point, one 10-minute video I’d encourage everyone to watch on YouTube is a speech by Kevin Liang, an MBA student from the Stanford Graduate School of Business.
In it, Kevin reveals how, as the son of two blue-collar immigrant workers, he worked hard, won a place at Harvard, then landed a job at an investment bank. A fantastic achievement, but he realised he knew very little about money and wealth compared to his peers.
In his first job at Citigroup, he was surprised to learn that colleagues in their early 20s already owned stocks and shares. One colleague had been bought shares in Apple by his mother at the tender age of 10 (smart mum!) Much later, a mentor told him about ways of diversifying and growing his wealth using tax-efficient investment products like Roth IRAs (a retirement account — in the UK, think pensions and stocks and shares Isas). But, as Kevin says, they could have been talking gibberish.
His plea is simple: “Let’s normalise talking about money. Allow yourself to be vulnerable and seek out financial advice. And if you’re more financially savvy, share your knowledge.”
As for my friend, I have strong-armed her into subscribing to the podcast, and I hope that our chat this week will be the first of many conversations we have about investing.
Claer Barrett is the FT’s consumer editor and author of the FT’s Sort Your Financial Life Out newsletter series; claer.barrett@ft.com; Instagram and TikTok @ClaerB.
