This article is the last part of the FT Financial Education and Inclusion Campaign
My best friend and I have had countless conversations over the years about life, the universe, and everything in between. But this week we had our first real discussion about investing.
Yes, we’ve had conversations about money before – including real estate – but never about the nuts and bolts of investing in the stock market. So why did it take so long?
If you are also in your 40s, it is likely that you have received an inheritance or were hoping to receive one. The growing number of families affected by inheritance taxes is encouraging older generations to pass on their money earlier, in the hope of surviving seven years after the gift and reducing their potential liabilities.
Even if this is not the case, many people in their 40s are finding that they can afford to invest much more meaningfully, as their income increases and their expenses (such as child care costs) increase. ‘children) are hopefully decreasing. Nonetheless, there is certainly an investment knowledge gap – and I launched a new FT podcast series this week to try to fill it.
Sitting around my friend’s kitchen table, it was a little strange to hear my “work voice” explain what’s been happening 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?) life, but often have very little idea about what they actually do all day at the office?)
The Magnificent Seven – some of the largest and best-known US companies, which dominate global stock indices – were not as strong after concerns about their future growth prospects caused sharp falls in the stock price of Meta and Tesla in particular. One of my contacts joked this week that we should rename them The Magnificent Five.
However, my friend had never heard this term. She also hadn’t heard of Nvidia (for the uninitiated, I agree that the AI chipmaker looks like a face cream), even though those seven stocks represent a growing share of the passive funds favored by uninvolved 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 desire.
Over the years, I’ve noticed that the cash-rich are generally short on time. We are so busy making money that it is often difficult to find the time to do it. This can lead to neglecting our finances rather than optimizing them.
Even working in the financial world doesn’t guarantee that you know what to do with your personal finances. Neither is being born into a wealthy family, where conversations around money are often taboo. But asking for help can also be difficult, because we fear appearing stupid for not knowing.
If you take the initiative to learn more, then you run into a third problem: financial jargon. Over the years, I’ve learned to speak the language of finance, and the new Money Clinic podcast format I’ve developed translates some of the key terms investors are likely to encounter into more human and more relevant.
Entitled The Five Minute Investor, our first episode in a series of eight shows aired this week on the Money Clinic feed. Each week, I will challenge a well-known Financial Times expert or special guest to explain concepts such as the power of compounding, investment returns, liquidity and price-to-earnings ratios in a way that everyone the world can understand, giving practical, tangible examples that we hope will lead to more “penny” moments for investors.
Katie Martin, the FT’s markets commentator, kicked things off admirably this week with a five-minute masterclass on the Mercenary Seven. As she notes in the episode, David Kostin of Goldman Sachs says the important thing to remember is that at the end of The Magnificent Seven (the 1960 film of the same name), four of the seven died.
Early feedback suggests people like short podcasts. I hope that people who think investing might not be for them will find it easier to give it a try and incorporate it into their daily lives.
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Learning about a new topic can seem intimidating, but technology is fueling the microlearning trend. You may have used apps like Duolingo, which help you learn a language in small, daily chunks. And the rise of social media platforms (owned mostly by these Magnificent Seven companies) means that short-form video content about money and investing has exploded in recent years on Instagram, TikTok and YouTube.
Critics might argue that this type of explanatory content is mind-numbing, but I consider it a less off-putting entry point. We encourage listeners who have enjoyed our Five Minute Investor shows to listen to the longer shows in the Money Clinic catalog and provide free links in the show notes to relevant FT articles as part of our wider mission financial education.
On this point, a 10-minute video that I encourage everyone to watch on YouTube is a talk by Kevin Liang, an MBA student at the Stanford Graduate School of Business.
In it, Kevin reveals how, as the son of two blue-collar immigrants, he worked hard, got a place at Harvard, then landed a job at an investment bank. A fantastic achievement, but he realized he knew very little about money and wealth compared to his peers.
At his first job at Citigroup, he was surprised to learn that colleagues in their 20s already owned stocks and shares. A co-worker had his mother buy Apple stock when he was 10 (smart mom!). Much later, a mentor talked to him about ways to diversify and grow his wealth using tax-efficient investment products like Roth IRAs (a retirement account — in the UK, think pensions and stocks ( Isas). But, as Kevin says, they could have been talking gibberish.
His plea is simple: “Let’s normalize discussions about money. Allow yourself to be vulnerable and seek financial advice. And if you are more financial savvy, share your knowledge.
As for my friend, I encouraged her to subscribe to the podcast and hope that our discussion this week will be the first of many conversations we will have about investing.
Claer Barrett is the editor of the FT and author of the book Sort out your financial life newsletter series; [email protected]; Instagram and TikTok @ClaerB.
