2019 has been eventful, to say the least! The Brexit deadline is fast approaching but the nature of the deal (if there’s any) remains unclear. And now that Boris Johnson is Prime Minister, the value of the Pound has been experiencing some turbulence. That’s not all! Trade tensions between the US and China have increased, and investors over the world are watching the trade war with worry as it could have a serious impact on their portfolio. Considering the agitation on the geopolitical scene, it wouldn’t be surprising to see would-be investors delaying their journey and waiting for shinier times to come. And yet by postponing your investment adventure, you could be missing out on potential growth. There’s a mantra in investing that goes ‘there’s no time like the present’. In other words, the best time to become an investor is now - here’s why.
Enjoy the power of compounding through investing
The earlier you start investing, the sooner your money could potentially grow and compound. Typically, when you invest in companies, you’re entitled to enjoy some of their profits in the form of dividends. Put simply, you’ll receive a sum of money from the companies you’re invested in, provided they’ve performed well. But the real magic happens when you reinvest your dividends. By paying them back into your Plan, you’ll be giving your pot a boost, and over a number of years, your money could snowball and grow exponentially bigger. So, investing as soon as possible could be a great way to take advantage of the compounding magic. If you decide to wait and delay your investment journey, you would likely miss out on potential growth. Here’s what happens when you procrastinate.
Let’s say you invest £200 a month in a Stocks and Shares ISA, and you plan on taking the money out on your 60th birthday. If you start investing at the age of 30, you could end up with around £130,652* once you turn 60. But now, let’s imagine you had started five years earlier, when you were 25. You could have celebrated your 60th birthday with approximately £178,037** in your pot. Time is key to building up wealth, so make sure you make the most of it.
Keep calm when markets are down
Too often, people choose to postpone their investment journey because ‘times aren’t right’. By this, they mean ‘markets are about to fall or will keep falling’. Unless you have a crystal ball or some superpower, it’s impossible to predict or even guess where stock markets are heading next. Financial markets have ups and downs, but these movements are unpredictable and the odds of correctly predicting when to invest to maximise profit and when to sell to avoid losses is minuscule. There’s a breed of investors, however, who try to do just that – needless to say, this rarely pays off! In fact, timing the market is likely to harm your investment journey. By leaving the boat during stormy times, not only are you making your losses real, you’ll also be missing out on the ‘bounce’, when markets recover. There’s no denying it, Brexit and the US-China trade war could have important effects on global markets, but it’s not a reason to delay your investment journey. Joining the investment world now and remaining invested over the long-term, regardless of market movements, is a good way to take full advantage of the power of investing.
* 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 £90,746. If markets perform better, your return could be £199,454. Values correct as of 21/08/19.
** 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 £115,042. If markets perform better, your return could be £289,950. Values correct as of 21/08/19.
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.
Investing is for everyone.
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