Saving regularly can be a painless way to accumulate funds, particularly if this money is taken automatically each pay day. Set aside £100 each month, and you will have squirrelled away £1,200 after one year, or £6,000 after five years. Trying to find a lump sum of this size to invest can prove
more challenging, without a bonus, bequest or some other windfall.
Over longer periods of time, compound returns – or receiving investment returns on your investment returns – could significantly boost the value of your savings. The longer your money is invested, the bigger this effect could be.
Regular saving can also help smooth out the ups and downs of the stock market. There is an old investment adage that it is time in the market, not timing the market, that makes investors’ money. With a regular investment plan you’re not trying to second-guess market movements, so you don’t run the risk of missing days when stock markets rise significantly.
Of course, this also means you will keep investing through market downturns. But when markets fall, you will be buying shares, or units in a fund, at cheaper prices. You could benefit as and when markets bounce back. The technical term for this is ‘pound-cost averaging’.
Please let us know if you would like to discuss your savings strategies.
The value of your investments, and the income from them, can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.