The Benefits of Investing
Holding all your savings in cash might seem a sensible and safe option but in a low interest rate environment your funds will grow very little. Inflation too could eat into your savings as it can impact your purchasing power. Even if your cash savings have gained a little interest, the money in your pocket could be worth less due to inflation – for instance that £2.50 double espresso you start the day with could suddenly be costing you over £3.
While it is sensible to want to hold some cash savings for easy access, it makes sense to diversify and look at potential returns from other asset classes.
For example, investing in equities, bonds or property can offer a good opportunity of growing your money over the longer term. Indeed it is a long-term approach to investing is generally accepted as being likely to provide the most benefit. Whether you start paying in to a personal pension when you first enter employment, invest in an ISA while still in your twenties, or invest on behalf of your children, the earlier you start the better. Even small regular payments each month into investment funds can result in a sizeable pot after 20, 30 or 40 years. Rather than have to scrape together school fees or watch every penny in retirement, your prudent investment planning could ensure a more comfortable and less stress-free lifestyle.But it is not just a case of ensuring your investments are started early and are well diversified, it is also important to make them as tax-efficient as possible. Under current tax rules, each year every UK adult resident is able to place investments within a tax-free ISA wrapper – the maximum in the 2016/17 tax year is £15,240 and in the 2017/18 tax year this rises to £20,000.
ISA accounts can be set up very easily and there are over two thousand funds to choose from which can be bought online for inclusion in your ISA portfolio. If you have no other investments, then your ISA may be your first introduction to the stock market – so if you are unsure of what investment funds best suits your need, you should seek the guidance of an financial adviser. If you'd like to find an adviser in your area, take a look at www.unbiased.co.uk.
Please note that as with any investment, its value can fall as well as rise and is not guaranteed. You may get back less than you invested. Remember also that tax rules can change.