Should I have stocks and shares investments at 50?

Important information -  the value of investments and the income from them can go down as well as up, so you may get back less than you invest. 

Q. I have no stocks and shares investments at the age of 50 — what sort of risk should I take when buying shares?

A: Investing in shares, or equities, can seem a daunting prospect, especially if you have little experience. Equities are considered higher risk because their value can fluctuate. The last few months have certainly highlighted how investors can be negatively affected by short-term volatility, with many seeing the value of their holdings fall.

However, over periods of 10 years or more, equities have typically outperformed both cash deposits and bonds — which is why many people turn to equity-based investments for their longer-term savings.

• Read: Investing versus saving: the basics 

You don’t say what your investment goal is, but even in your 50s many people are still investing with a long-term horizon in mind. For example, you might be investing for retirement and not need these funds for another 15 or 20 years, giving you plenty of time to ride out the ups and downs of shorter-term market movements. 

There are a number of ways to manage risk when investing in equities. The most obvious is to diversify — to spread your money across a range of shares rather than relying on a single company.

• Read: Is my portfolio diversified enough?

Investing in funds is the simplest way to achieve this, with an active fund the manager selects and manages the underlying holdings. Alternatively, you can invest in a passive tracker fund or ETF that follows one of the main stock market indices. For example, with an MSCI World Index fund, your money is linked to the returns of around 1,500 companies globally.

Fidelity’s investment platform offers access to hundreds of funds. Some of these will be classed as higher risk than others. For instance, a fund that invests in just one sector, such as technology stocks, is likely to be more volatile than one that spreads investments across a broader range of sectors and regions.

To help you choose a suitable fund, the Fidelity Select 50 is a curated list of funds chosen by investment experts based on detailed research and performance metrics. The list includes both active and passive funds, as well as investment trusts and ETFs.

• Select 50: Browse our Select 50 funds

Another way to reduce risk is to invest regularly rather than making a single one-off lump sum payment. Making monthly contributions means you are not trying to second-guess market movements or find the perfect time to invest.

If you are investing regularly and the market falls, your payments will buy more shares or units in a fund, potentially benefiting from market recovery later. This is known as ‘pound cost averaging’ — although it doesn’t guarantee profits or protect against losses during prolonged downturns. 

• Read: What is volatility? The basics

Finally, although you say you don’t currently have any equity holdings, if you have a workplace pension it is almost certainly invested in equities, so you may already have some exposure to the stock market.

Remember, equities offer the potential for strong long-term returns, but you should still keep a ‘rainy day’ fund in cash savings that can be accessed in an emergency.

• Open a Stocks and Shares ISA
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• Read: How do I start investing? 
• Read: Retirement plan checklist: 10 years from retirement
• Read: 6 habits of successful investors