Brits have been urged to take a new approach to investment that could net them thousands of pounds in returns. Savers who regularly invested funds into the iShares US Equity Index over the last 10 years have grown sizeable pots of over £6,000, according to the financial firm AJ Bell. Meanwhile, those who deposited £25 monthly into the FTSE All-World Index fund have seen returns of £5,646 in the span of a decade, prompting calls for more people to consider the savings tactic.
Laura Suter, director of personal finance at AJ Bell, said: “When people think of investors, they may imagine people with private yachts or thousands of pounds in the bank, but investing doesn’t have to mean big sums or expert timing to deliver decent results. Putting away just £25 a month could grow into a sizeable investment pot over time, and [these] figures highlight the powerful impact of investing little and often.”
According to the Social Market Foundation, most people in the UK do not individually invest, with just 8% of household wealth held directly in equity investments – the lowest in the G7.
The think tank warned that the £430 billion in savings held in cash or low-interest accounts was being eroded by inflation when households could be generating returns through investment and called for greater promotion of financial literacy last autumn.
Ms Suter said savers need to ensure they’ve paid any pricey debt before investing to avoid racking up interest that will “more than wipe out” the gains made through investing.
She added that investing is generally only suitable for money that is not planned to be spent for the next five years or more, but for those in the right position, a “little and often” approach can really add up.
“If you put away just £25 a month, less than £1 a day, you could build up a tiny pot over a few years,” Ms Suter said.
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“Assuming a 6% a year investment growth after charges, you’d have £1,793 after five years and £4,191 after 10 years. If you kept up the trend for 15 years, assuming those same 6% a year investment returns, you’d have just over £7,400 in your investment pot, or almost £11,700 after 20 years.”
“Investing for the first time can feel daunting,” the personal finance expert added. “If you don’t feel confident picking which countries or sectors to invest in, you can defer asset allocation decisions to a professional.
“Investors also need to make sure they understand what they’re buying, and why they think it will make money – whether it’s a fund or a share. All too often, investors are lured in by the promise of high returns or invest because a friend has recommended it, but you need to make sure you understand how the investment works and all the risks before you commit your money.”