Save time and hassle when you investThe best way to make the most of your investments is to start early and invest regularly.
Why start early?
When you save or invest you benefit from compound interest. What this basically means is that you earn interest on interest from your savings. Compounding also applies when you reinvest any interest and dividends from your investments.
So the longer you invest the greater the effect compounding has on your money. This chart shows the results over 10, 15 and 20 years for savers and investors.
Click on the chart to enlarge. Also scroll down to see how the tortoise beat the hare!
Investments don’t generally offer quick returns and investors should be wary if they do. The value of your investment is more likely to rise over time if you commit to investing for a period of years – though this isn’t guaranteed. Investing money which you won’t need to spend for a long time means you should be able to ride out any market falls.
Why invest regularly?
You can save time and effort by setting up a direct debit or standing order to invest regularly. Many funds allow you to make regular contributions by direct debit from as little as £50 a month.
Putting money away regularly means:
- Investing is automatic and hassle-free
- You avoid making a large one-off investment when prices are high, and so losing money
- You can increase, decrease, stop, suspend and resume payments whenever you choose without penalties
- You can invest regularly into an ISA or a pension and enjoy tax benefits
Why did the tortoise do better than the hare?
Both saved £18,000 but the tortoise started earlier to benefit from compound interest.
Source: Lipper IM and Morningstar to December 2012. Cash: Instant access building society account; Equity: IMA All Companies sector average Nominal returns with income reinvested after UK basic rate tax. Past performance is not a reliable indicator of future returns.