You don’t need to be rich to invest
Why regular investing is the best thing you can do right now.
Last Updated: 1 January 2003
Important information - This article isn’t personal advice. If you’re not sure what’s right for you, seek advice.
What springs to mind when you think of an investor? A man in a suit? Perhaps an older, rich man who’s made a fortune from the stock market? Or a trader shouting ‘buy, buy, sell, sell!’?
If you google ‘top investors’, that’s certainly what’s portrayed. But there’s so much more to investing.
First, you don’t need to be super-wealthy. Investing might be associated with luxury cars, yachts, maybe even cigars (nod to Leo in Wolf of Wall Street). But you can start with as little as £25 a month.
The second thing to highlight is you’re most likely already an investor.
Chances are you have a workplace pension (maybe several) or have a personal pension (like a Self-Invested Personal Pension) if you’re self-employed. Within that pension you’ll likely have some money in the stock market.
Plot twist, you’re already an investor
So, you’re already an investor. Plus, you’ve got some retirement savings.
But what about your other goals in life, like buying your first home (or getting onto the next rung of the property ladder), paying for your kids’ education, or simply your own personal goals?
Once you have built your emergency cash pot, investing can help you reach your goals faster than saving alone. You might already squirrel away money into a savings account after pay-day, or after you’ve received a bonus at work.
Well, you can do the same thing into an investment account – if you are happy with the risks involved. And you don’t need to be rich to get started. You really can invest with £25 a month – the cost of a Pret subscription.
The key is to keep investing for the long term. Over time, your regular investments can add up.
Let’s say you invest £25 a month for 10 years. You could build up a pot worth £3,874, assuming your investment grows 5% a year. Remember of course, returns aren’t guaranteed, and the figure does not account for inflation, charges or taxes.
This might not seem crazy. But when you invest more, let’s say £100, assuming a 5% growth, again not taking into account inflation or charges, your money could blossom into a pot worth £15,499 – that’s potentially £3,499 more than if you had just left it in cash.
The investment growth is thanks to something called compounding. Einstein reputedly once called this the “eighth wonder of the world”. It’s where you earn a return not only on the original investment, but also on all the returns you’ve generated in previous years.
So, investing even small amounts regularly can hopefully snowball into a decent pot of money, helping you build your wealth and achieve your dreams.
This calculation above is only an example. Actual returns will vary depending on the investments you choose. Unlike cash, the value of investments can go down as well as up in value so you could get back less than invested.
Want to start investing outside your pension?
From ISAs to a Fund and Share Account, there are lots of accounts out there to choose from.
The easiest way to get started is by defining your goals. Do you want to save for a first home? Or are you building up a pot of money for your children?
Once you have that sorted you can use our handy compare accounts tool to find an account that’s right for you.
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