Do you ever feel like investing is an exclusive club for people with big bank accounts? That you need a six-figure salary to even think about it? It’s a common feeling, but it’s a myth that stops so many people from getting started. The truth is, investing is for everyone, no matter how much you have to start with.
How can compounding help?
The real secret to building wealth isn’t a huge amount of starting money; it’s being consistent. Even a small amount invested regularly can grow into a significant sum over time, thanks to the magic of compoundingThe return you earn on top of your investment gains by reinvesting your profits instead of withdrawing them..
Think of compounding as your money having a snowball effect. You invest a little, it earns a return, and then that return starts earning its own return, and so on. The longer you let it run, you give the snowball more time to get bigger and faster.
An effective way to make it easy for compounding to work its magic is by setting up a recurring deposit on your investing account. It doesn’t have to be much – just what you can afford. If you’ve not got one set up already, you can add a weekly deposit to your Stocks & Shares ISA today.
Capital at risk. ISA and tax rules apply.
How much you could invest
Imagine you only invest £20 a month. It might not sound like a lot, but over 30 years, with a 7% average annual return, that total investment of £7,200 could grow to over £24,000. The key is to start early and let time do the hard work.
Today’s investing apps have made it so much easier. You no longer need to buy a whole share of a company like Amazon, which can cost thousands of pounds. Many platforms offer fractional shares, so you can buy just a small slice of a company for a few pounds. And you can start with just a few pounds.
Plus, you can explore low-cost tracker fundsFunds, also called ‘tracker funds’, are financial instruments that have been set up to match or ‘track’ the price of a market index. Investing in a fund lets you get exposure to different financial assets like shares and bonds, without having to buy them directly. or ETFs (exchange traded funds) that let you invest in hundreds of companies at once. This means that buying a fund or ETF offers instant diversification for just a few pounds.
Don’t let the idea of needing a lot of money hold you back. The most important step isn’t the size of your investment; it’s simply making a start. By investing what you can, you’re building a powerful habit that will serve you for a lifetime.
That’s it for this myth-buster. Top up your account today. Or if you’re not investing yet, a Stocks & Shares ISA is a popular account with existing Moneybox investors.
All investing should be long term. The value of your investments can go up and down, and you may get back less than you invest. Projections are not a guarantee of future performance. You may get back less than you invest.