Keeping your money in a savings account may mean no real growth, but it may mean no real losses either.
But you could be losing out. At Continuum we are looking at why this could actually be a good time to be a first-time investor.
Is investment safe?
Unlike savings, where you can predict exactly how much (or these days how little) your cash will earn, investment always carries some level of risk. As the reaction to the crisis has shown, markets can be volatile, and big falls can affect your portfolio.
But unless you panic and sell up when the market falls, a process known as crystallising your losses, you stand every chance of getting back that value as the market recovers, which history suggests will usually happen. Despite the fact that the coronavirus crisis is still not over, we have seen a steady recovery in the markets. Many people who were bemoaning their losses have made back what they have lost.
No investment can ever be 100% safe. But with a sensible investment strategy, you should be able to build your wealth over time, trusting to the power of the markets to smooth out the falls, as they have already started to do this year.
So why start now?
The simple answer is that now is almost always the best time to start investing, because there may be nothing to be gained by waiting.
In fact, the sooner you start, the more you can benefit from two important factors.
The first is that by investing in equities you are buying a share in profitable companies. This means that you share in the profits they generate, with dividends and hopefully growth in the value of your holdings as time goes by.
The second is compound interest. This is the principle that any interest your money earns also earns interest. For example, if you invest £100 at 5% you have £105 at the end of the year. The next year, that £5 also earns interest. The numbers sound small, but over the years they mount up. Compound interest is one of the main drivers of investment returns over the long term.
So how do you start?
Getting started can be easier than you think. You don’t need to be a stockmarket expert, with a finger on the pulse of the markets. You can simply use a managed fund, with a professional to take care of picking the investments for you. You can pay in a cash lump sum and let your fund manager get on with making the most of it for you – or even pay in monthly. This arguably makes investing as simple as saving. A regular direct debit into an investment fund can actually help you make the most of your investment, letting you buy more units when prices are low.
What’s more, if you use your ISA entitlement for your investment, the money you earn will be tax free – although you will be restricted to investing no more than £20,000 per year (this is the ISA allowance for tax year 2021/2022).
Is it really that simple?
It can be that simple to start investing, but to make your investments really rewarding, you need an investment strategy that reflects your current resources, your future plans the time you have to grow your money and your attitude to risk.
At Continuum, we know that successful investment is not based on lucky opportunities, but on long term investment strategies designed around your individual circumstances.
We work with you to plan an investment strategy. We will then use that strategy to help you build a balanced portfolio to spread the risk, provide opportunities, and help you reach your financial goals.
Book a free initial consultation
We can give you individual support from an advisor who will work to help you use the market, whatever direction it may take, by planning the investment portfolio you need and practical help to put it into action.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
Equity investments do not afford the same capital security as deposit accounts.
The Financial Conduct Authority does not regulate taxation advice.