Almost two-thirds (62%) of Brits1 aren’t currently investing at all, and yet, putting your money in the stock market has many benefits. Here’s why it could be a good idea to invest.
Give your money a chance to grow
Since 2008, investing is associated with money loss in most people’s minds. Whilst there’s a risk you could end up with less than you initially invested, there’s also a potential for positive returns. After all, why do people invest? If you ask any investor, they’ll probably tell you that they buy shares, bonds, and other types of investments, in the hope of making a gain. And as long as they commit long-term, they’ve got great chances to achieve their goal. For example, people who invested for any 10-year period between 1986 and February 2019 in the FTSE 100 index have had an 87% chance of making a positive return2, and interestingly, this period included important market downturns, like the dot-com bubble and the 2008 crash. Investing won’t make you rich overnight, and along the way, you may experience some turbulence, but if you’re ready to stick with your investments over a number of years, you could well end up with a decent pot.
Enjoy higher returns
Brits might not be investing, but most of them are putting money in savings accounts or Cash ISAs. There’s no denying it, building an emergency fund is a crucial thing to do – if an unexpected bill comes your way, you’ll certainly be reassured that you have enough funds to cover the expense. But saving cash isn’t always the best way to boost your finances over the long-term. In fact, sticking exclusively to your savings account or Cash ISA could harm your financial future in the long run. When you save, you typically get a fixed interest, on top of your deposit(s). This means you’re guaranteed to get back what you originally saved, plus a little extra. However, this doesn’t take into account the impact of inflation on your savings. If the interest rate you get from your bank is lower than the rate of inflation, the value of your savings would drop. So, make sure you consider other options, like investing, to build up your pot. Historically, investing has beaten cash over the long term. A Barclays Equity Gilt Study found that since 1899, British stocks have returned on average 4.9% a year, compared to 0.7% for cash3.
Bring your dreams to life
Not only could investing help your money grow, it could also bring you a step closer to achieving your long-term goals, whether it’s travelling around the world or turning your passion into a profitable business. Let’s say you want to travel across continents. You estimate you’ll need approximately £25,000 to turn this trip into a reality. So, you decide to open a Stocks and Shares ISA and put in £300 every month. After 7 years, you could end up with approximately £27,8654 – enough to go on your epic adventure.
Help your children
We all want what’s best for our children but giving them a head start in life can require some planning on your side. Investing could be a great way to plan ahead and boost their financial future. You can either open a General Investment Account and start putting money in on their behalf, or you can decide to invest in a Junior ISA. The latter option comes with many advantages. Every year, you can invest up to £9,000 (subject to change) and your child won’t need to pay UK tax on any gains they make. That way, they get to keep more of their returns. But that’s not all! With a Junior Stocks and Shares ISA, the money exclusively belongs to your child, meaning nobody can dip into their pot and slow down the potential growth. Also, the money is locked away until your child’s 18th birthday. What does it mean, you ask? Once they turn 18, your child will gain full control over their savings and they’ll be able to choose what to do with the money, whether it’s paying for university, taking a gap year, or leaving it in their account as an adult ISA.
Prepare for retirement
You might already be enrolled in your workplace scheme where you make monthly contributions but are you sure it’ll be enough to afford a comfortable retirement? A recent study found that you’ll need around £27,000 a year5, on average, to retire comfortably – needless to say, that’s not a small sum! Investing some extra money could help boost your future golden days. And the sooner you start, the bigger boost you could enjoy. If you invest £100 a month in a Stocks & Shares ISA when you’re 25, you could end up with around £121,6816 at the age of 66, which could help you have the later life of your dreams.
Make a positive difference
It’s not always well known, but investing can be a great way to drive positive change in society. We live in exciting times where it’s possible to invest ethically. By this, we mean you can put your money to work whilst supporting companies committed to doing good. So how does it work? Well, it’ll depend on the investment route you decide to take. You can pick your own ethical investments, but this typically requires extensive research. Alternatively, you can invest ethically using an online investment platform that’ll do the hard work for you.
At Wealthify, we offer Ethical Investment Plans that contain best-in-class ethical funds – think of these like baskets full of sustainable investments. Most funds will aim to exclude harmful activities from their selection process. For instance, the funds we use don’t invest in weapons, adult entertainment, tobacco, and gambling. Other funds will take the exclusion process further and remove other activities, such as deforestation and animal testing. The tolerance threshold will also vary between funds. Some will completely remove harmful industries, whilst others will invest in organisations involved in such industries, provided the profits derived from unsustainable activities don’t exceed 10%. Funds will also select companies that are doing their part for the environment and society. They’ll look at how they behave in three distinct areas: environmental, social, and governance (ESG). In other words, they’ll examine things like how much energy is being used, how well the staff are being treated, and how transparent companies are with their shareholders. Not only will companies be given an ESG score they’ll need to maintain and improve, they’ll also be monitored on a regular basis. And if they let their ethical standards slip, they’ll be removed from the fund.
Investing is easier than you might think
Investing has many advantages. It gives your money a chance to grow, and it can help you make progress towards achieving your goals. But that’s not all. Investing is also a good way to help your children and prepare for your later life. And if you decide to go ethical, investing could even help you drive positive change in society. So why are people so reluctant to join the investing arena? Well, for many, investing remains this obscure thing only people in Wall Street can do. But times have changed, and investing has never been easier! With robo-investing platforms, like Wealthify, you don’t need much knowledge or previous experience to give investing a go. All you need to do is choose how much to invest and the risk level that suits you. Our Investment team will do the rest, from picking your investments to managing your Plan. Also, there’s no minimum investment required, meaning you can invest as little as you want. This is effortless investing for you!
1: Wealthify ISA survey. Research conducted by Opinium Research between 9– 12 March 2018 amongst 2,010 consumers
2: Bloomberg
3: https://moneyweek.com/505257/stocks-beat-cash-and-bonds-over-the-long-term/
4: 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 £23,872. If markets perform better, your return could be £31,998. Values correct as of 22/08/19.
6: 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 £73,673. If markets perform better, your return could be £209,322. Values correct as of 22/08/19.
The tax treatment depends on your individual circumstances and may be 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.
