Published on 7 November 2018

Time was the big factor that finally overcame my fear of the stock market.

I knew that over the long term, investing made sense. When considering a pension far in the future, I went straight to investments.

But otherwise, I’d always been nervous of investing in stocks and shares, reluctant to lose any of my hard-earned cash.

All the websites, ads and articles about investing come with warnings attached. ‘Your capital is at risk’. ‘The value of your investments can go down as well as up’. ‘You risk getting back less money than you invested’. ‘Don’t invest money you can’t afford to lose’.

Why would I want to put my money somewhere it might disappear?

Invest for longer

But here’s the thing. The longer you invest, the more chance that stocks and shares will perform better than cash.

In fact, the boffins at Barclays Capital have crunched the numbers way back to 1899.

Since then, shares beat cash deposits more than nine times out of 10 in periods of 10 consecutive years, according to the Barclays Equity Gilt Study. Stretch to 18 years, and shares did better than cash 99% of the time.

99%? In my book, that’s pretty much a dead cert.

The lightbulb moment came when I realised I viewed the money in my cash individual savings account(Isa) as earmarked for retirement, a good 20 to 30 years away. Suddenly switching to stocks and shares seemed less of a gamble, and much more sensible than guaranteed rubbish returns on cash.

Even over shorter periods, my money is still likely to do better on the stock market than languishing in a savings account. Over just two years, shares came out on top 68% of the time. However, most experts recommend investing for at least five years – a period where Barclays calculates that shares have outperformed cash 75% of the time.

Keep some cash

To stay calm faced with short term movements in the stock market, I kept a cash buffer, in case I need money in a hurry. Experts recommend setting aside living expenses for three to six months. Stashing some cash to cover financial emergencies means you won’t be forced to sell investments at a bad time, if the price has fallen lower than you paid for them.

Paying a professional

Once I’d decided to invest, I had to overcome my fear of choosing bad investments that would promptly plummet.

I remain reluctant to buy shares in individual companies, in case I choose the wrong ones.

Instead, I prefer pooled funds – such as investment trusts, unit trusts and open-ended investment companies – where a professional fund manager spreads investors’ money across a whole range of companies, countries and assets.

In return, you pay management charges each year when using a pooled fund.

Choose investments carefully

Ever cautious, I was keen to find investments and managers who both had a long track record of surviving and thriving through different market conditions. I was also keen to keep annual management fees low.

Luckily, the investment trust sector includes funds that have not only successfully surfed stockmarket waves for more than a century, but also paid increasing income, known as dividends, for several decades.

These funds are called ‘dividend heroes’. There’s even a handy list of the 20 investment trusts that have doled out higher dividends every year for more than 20 years on the website for the Association of Investment Companies (AIC).

Four of those investment trusts have actually increased their dividends for 50 years or more in a row – City of London, Bankers, Alliance Trust and Caledonia Investments.

Consider seeking independent advice

I then sought expert advice, and asked an independent financial adviser (IFA) if he thought any of the dividend heroes were worthwhile investments.

You can find IFAs in your area through www.unbiased.co.uk or check out reviews of financial advisers on www.vouchedfor.co.uk.

He suggested three of the dividend heroes, and added one further investment trust.

Finally I was confident enough to move my money into the stock market.

Faith Archer is an award-winning personal finance journalist and also a money blogger at Much More With Less