Your common investing questions answered!

Always wondered about the difference between a 'stock' and a 'share' but felt too silly to ask? Don’t want anyone to judge you because you’re unsure of who or what determines the price of a share? Our Investment Team have answered some of the most common investing questions because there are no stupid questions when it comes to this topic!
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With investing, we believe there’s no such thing as a stupid question. You shouldn’t feel silly because you’re not an expert that has it all figured out straight away. After all, there can be a lot of jargon involved – especially when it comes to things like pensions (which many people might not even realise are invested in the stock market).

Plus, with the rise of robo-investment services, like Wealthify, you don’t need to know about the stock market to invest your money as you can choose for a team of experts to make the decisions for you.

However, we understand that when you start investing, you’re likely to be intrigued about how it all works and will want to gain a better understanding of where your hard-earned money is going – and if it is growing or falling, what is causing it to do so. If you have a pension, then you may also want to find out more about how it works so you can better plan for your future.

This is why our Investment Team have answered some of the ‘silliest’ investment questions that you may have been too shy to ask below. There’s no judgement from us!

General investing

Question: Who decides how much stocks and shares are worth?

Answer: The value of an investment is determined by market perception and expectations. If investors are generally optimistic about the prospects of a certain investment, or the company announces that sales/profits are better than expected, then there will likely be more buyers than sellers of this particular share, causing its value to increase.

The opposite is true if investors are pessimistic about an investment, or if a company announces lower sales/profits, its value might decrease due to the greater amount of sellers vs buyers.

Question: Why is it called a ‘stock’ and what’s the difference between a stock and a share?

Answer: ‘Stock’ and ‘share’ are often used interchangeably, even by financial professionals, and both represent units of ownership of one or more companies. However, there is a small but key difference between the two terms. ‘Stock’ is used when discussing ownership of companies in general, whereas ‘share’ is used to describe ownership of a specific company. Another way to think about it is that shares are units of one company, but stocks are a collection of shares in one or more companies.

For more information on this, see our guide: What is the difference between stocks and shares?

Question: What does ‘day trading’ mean?

Answer: ‘Day trading’ is very much a contrast to investing. Day traders aim to exploit short-term opportunities in the market, utilising charts, algorithms, and intuition through various strategies. Investing is considered long-term and often requires patience, whereas day trading is frantic, and positions are typically opened and closed numerous times within a day.

For more information, check out our guide: Day trading vs investing.

Question: How much risk is involved in investing?

Answer: Every individual investment carries an element of risk. However, this risk can be managed by spreading investments across various assets, markets, and industries. The process of doing this is known as ‘diversification’. Ever heard the phrase “don’t put all your eggs in one basket”? Well, the same applies to your investments.

Our Investment Team ensures that each Wealthify portfolio is sufficiently diversified. We also offer 5 different risk levels, and it is essential that every investor selects a portfolio with a risk level they are comfortable with. Find out more about our risk levels.

Question: What sort of fees do you get charged when you invest and why?

Wealthify’s annual management fee is 0.6%, but as with most investments other costs apply (but we aim to keep these as low as possible). Our average investment costs are 0.16% for our Original Plans and around 0.71% for our Ethical Plans.

These fees cover everything we do, from our experts building and managing your Plan, buying and selling on your behalf, and rebalancing investments, through to having our Customer Care team on hand to solve issues that may arise or answer any questions you have.

For our fees, we offer:

  • Support from our team via live chat, phone and email
  • Visibility and tracking of your investments 24/7 online or in our app
  • Free withdrawals on our ISA and GIA products
  • No charge to transfer your money in or out of your ISA or GIA
  • Securely held investments with an FCA regulated custodian
  • Investment news and insights posted via our blog

You can learn more about our fees here.

Stock markets

Question: What is the FTSE 100 and why is it called that?

Answer: FTSE stands for The Financial Times Stock Exchange, so this is where it gets its name from. It’s also commonly referred to as the ‘Footsie’ or ‘Footsie 100’ when said aloud.

The FTSE 100 Index consists of the largest publicly traded companies in the UK. However, because the FTSE features multinational companies as well as British ones, it’s often used as an indicator of both UK and international economies.

For more information, check out our guide: What is the FTSE 100?

Question: What is the oldest stock market in the world?

Answer: The Amsterdam Stock Exchange (Euronext Amsterdam) is the world’s oldest exchange, which opened for trading in 1602. This was the first exchange to formally trade in stocks and bonds.

ISAs and ISA allowances

Question: Can I open a new stocks and shares ISA every year?

Answer: Yes, but you can only deposit money into one Stocks and Shares ISA per tax year. However, with Wealthify, you can open multiple Plans with different themes (Original or Ethical) and risk levels within the same tax year within your ISA allowance.

Question: What happens if I go over my yearly ISA allowance?

Answer: In the UK, you get an ISA allowance of £20,000 for the 2021/22 tax year (the tax year runs from 6 April to the following 5 April, which means you have until that date to use it each year). Because of this ISA allowance, you can save or invest up to this amount tax efficiently in ISAs each year (although this allowance is subject to change. The allowance is also different for Junior ISAs).

If you go over this amount, HMRC should be contacted as soon as the allowance is exceeded, and they will determine the appropriate action to take. HMRC review the records of each individual and it is likely that they will contact you should the allowance have been exceeded during the tax year.

If you need help, the HMRC helpline for ISA and savings enquiries is 0300 200 3300.

Question: Can I withdraw money from my child’s Junior ISA early?

Answer: No, a withdrawal cannot be made from this type of ISA until the associated child turns 18 years old. The JISA also belongs to the child and only they can withdraw this money after opening an Adult ISA for themselves. If the Junior ISA is with Wealthify, it will automatically turn into an Adult ISA when the child turns 18.

However, there are exceptional circumstances in which a withdrawal can be made, which are:

  • Where a terminal illness claim made on behalf of the child has been agreed
  • On closure of the Junior ISA (‘JISA’)
  • To meet certain provider management charges and other specific expenses – allowable charges and deductions under the management agreement include redemption of units at the investor’s request to pay charges due to their adviser.

For more information, please visit the GOV.UK website

Pensions

Question: Why does the value of my pension go up and down?

Answer: Pensions consist of various investments and like all other portfolios, are influenced by the value of these underlying assets. Investments and financial markets often fluctuate in value, which causes the value of your pension to go up and down.

Question: Can I access the money in my pension early?

Typically, you cannot withdraw from a pension until you’re 55 (this will increase to 57 in April 2028). However, there are rare instances where early withdrawals are permitted, such as illness, sickness or disability. Some occupations such as footballers and ballet dancers used to be able to retire earlier, not sure if this is still the case?

For more information regarding this, please visit the MoneyHelper website.

Question: What is meant by a pension annuity?

Answer: An annuity converts your savings into an annual pension, giving you a guaranteed income for life, or a specified period. You can find out more by reading our Pension FAQ.

Want to find out more about investing? Need help getting started? Contact our Customer Care team.

Keen to invest but don’t know how to get started? With Wealthify, you can invest as little or as much money as you like and choose a risk level that suits you. Our experts will then take care of your investments for you. Discover more about Wealthify and what we do.

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

The tax treatment depends on your individual circumstances and may be subject to change in the future.

Wealthify does not offer financial advice. Please seek financial advice if you're unsure about investing.

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