Now, investing can be daunting when doing it for the first time. Stocks, bonds, market moves, the value of your investment sometimes going down as well as up. Unless you’re an enthusiast, you might think it’s just not for you.
But it could be effective in growing your money for the more distant future.
The focus should be on that last word though – future. David stresses investing should only ever be for the long term – five years or ideally longer, like a decade. And you should only consider investing any surplus money you have over and above your other needs.
David adds, “If you’re in it for the long haul, investing could grow your money more than if you kept it as cash. There can be bumps in the road along the way, but the MSCI All Countries World stock index, for example, has risen significantly over the last five and 10 years. So investing could increase the value of the money you put aside for the future.”
Some stats to support David’s point. The MSCI All Countries World stock index has returned 51% over the last five years – as at 28 February 2023 – and 169% over 10 years (in sterling, with income reinvested)*.
It’s always worth remembering, though, that past performance should not be taken as an indication of future performance. The value of investments can fall as well as rise, and you may not get back what you put in. You should continue to hold cash for your short-term needs.
One thing that could help manage the potential risks involved is diversification – a mix of stocks, bonds and other assets. For example, when stocks fall, bonds tend to rise as investors move to the relative security they can provide.
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