Investing is a classic example of an activity which everyone seems keen to give an opinion on. The problem is that everyone has their own reasons for expressing the views that they do, and, almost invariably, there’s an element of self-interest involved in the investment advice that people give.
So, for example, the guy in the pub who’s made a killing by investing, say, in Bitcoin or Nvidia shares and keeps saying you should do the same, may just be showing off. Or perhaps he’s waiting for the price to rise further before cashing in and therefore has a vested interest in talking the investment up.
Media outlets that tend to feature active funds rather than cheaper passive alternatives have their own motives too. Active investing makes for better stories — and, crucially, more clicks — than indexing. Also, advertising by active fund managers largely pays for journalists’ salaries.
But what if it’s a politician who’s suggesting you invest your money in a particular way? How much credibility should we give to what they say?
In recent months, both of the major parties have been keen to promote investing in UK stocks. The Conservative government announced plans in the March budget for a new “UK ISA”, which would have an additional £5,000 allowance, on top of the existing £20,000 allowance across other types of ISAs. The goal is to encourage individuals to invest in UK assets. Whether or not the idea ever comes to fruition, Labour politicians have been broadly supportive.
The former Pensions Minister Ros Altmann has even suggested that investors should be made to invest 25% of their retirement savings in UK companies. By “neglecting” UK equities, she says, investors have “pushed valuations to exceptionally cheap levels.” Making people buy more British shares, she argues, would be a “win-win” for the country and for investors.
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