Years ago, investing was reserved for the privileged few who could afford to invest thousands. Luckily, things have changed and today, most people can enter the investment world, regardless of how much they earn.
How much money should you have to invest?
When it comes to investing, there’s no right or wrong amount to get started, and typically the decision will depend on your financial situation and personal circumstances. If you can’t afford to invest large lump sums, that’s fine. You don’t need a fortune to dip your toe in the investment world. Thanks to digital investment services, like Wealthify, you can embark on your investment journey with as little as you want.
And whether you can afford to invest £1 or £100,000 (you can start a personal pension with just £50), we do the investing for you, so you can spend more time doing what you love. A personal pension (also called a 'Self-Invested Personal Pension' or 'SIPP') is a pension that you set up yourself and personally contribute to, giving you more flexibility over how you invest for your future. It can also be used to supplement an existing workplace pension.
With Wealthify, all you need to do is choose how much to invest and the investment style that suits your needs. Our investment team will then build you a diversified portfolio with just the right mix of investments and manage your plan on a regular basis. Not only will they keep a close eye on financial markets, they’ll also make changes, when needed, to keep your investment Plan on track.
What’s the best way to invest small sums?
Building up a decent nest egg when you can only afford to invest small sums isn’t mission impossible. One option is to invest little and often without worrying about where markets are heading next - that way, your plan gets fed regularly and you’re less exposed to short-term fluctuations. But that’s not all! Topping up your plan frequently, commonly known as drip feeding, allows you to take advantage of the low prices during market storms. In other words, by investing regularly, you have the possibility to grab cheap investments that could potentially increase in value if the markets go back up. If you want to drip feed without the hassle, setting up a Direct Debit or standing order, from your bank account to your investment plan, could help.
Investing little and often could help boost your investment journey, but if you want to maximise your potential returns, it’s also important to commit long-term. Typically, remaining invested over a number of years gives your money more time to flourish and compound. When you invest in the stock market, some companies will pay you dividends – these are sums of money paid out of their profits. If, on top of your initial investment, you put these dividends back into your plan, your money could quickly add up, and if you keep doing this over a number of years, your pot could exponentially grow.
Let’s take an example. If you open a Stocks and Shares ISA and invest £200 a month and remain invested for five years, you could end up with about £12,8611. But if you wait another five years, you could get approximately £28,1592 – that’s around £15,000 more! So, try to be patient and let time do its work.
1: This is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £11,385. If markets perform better, your return could be £14,479. Values correct as of 30/10/19.
2: This is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £23,425. If markets perform better, your return could be £33,631. Values correct as of 30/10/19.
The tax treatment depends on your individual circumstances and maybe subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.