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Can I hold my nerve and avoid selling if my investments drop? (you should wait for markets to rise again to avoid crystallising losses).

How much could I stomach seeing my fall in value along the way?.

Am I comfortable tying my money up in investments for at least five years? (if not, it might not be a good idea to invest).

How long am I happy to leave my money tied up for?.

Make sure you understand what is motivating you to invest. The rising cost of living means your money won’t go as far in the future. Keeping your money in cash may feel the safest option but you’ll be losing money in real terms.

#Closed hands means cheap myth free#

If you are still worried about investing, it is important to bear in mind that nothing is risk free when it comes to your money. This is money for emergencies like your boiler breaking.

Make sure you have a “rainy day fund” of between three and six months’ earnings.

Read more about whether to pay down debt or save here. Otherwise the interest payments would offset any investment gains.

Pay down any expensive debt with high interest rates such as a credit card or overdraft.

#Closed hands means cheap myth how to#

Your cash may grow faster with investing thanks to the snowball effect of compound interest How to start investing What should I do before I get started?īefore you buy shares or funds, it’s a good idea to:

#Closed hands means cheap myth plus#

You have your original investment, plus the return you make each year, and that in turn will earn interest.Įffectively the interest earns interest and so your money grows at a faster rate. The longer you give an investment to grow, the better. And the bigger it gets, the larger a surface area it has to capture even more snow. The longer it rolls down the hill, the more snow it captures, and the bigger it gets.

Imagine a snowball, rolling down a snowy hill. This is what Einstein called the “eighth wonder of the world”. After 5 years, at the current rate of CPI at 7%, your savings pot would in fact be worth around £7,830. After five years:Īnd actually due to the impact of inflation eroding the spending power of the cash in your savings account, in real terms it would be worth even less. Let’s assume you invested £10,000 over five years (assuming 5% growth), and put the same amount in a savings account paying you an interest rate of 1%. Your money can really multiply in the long run The best easy access cash ISA rate is currently 1.5% from Chase, according to Moneyfacts. The low interest rates offered by banks and building societies are not enough to beat inflation which at the moment is 7%. Building up cash isn’t enoughĪre you often shocked at the bill when you fill up with petrol or do your weekly shop? Yes, the cost of living is rising.īuying the same amount of stuff is becoming more expensive over the long term. In contrast, while you’re likely to experience losses when investing, you’re less likely to lose the lot and there is a chance you make up those losses over time. If you make a wrong bet at your local bookies, you will lose all of your money. While we all need cash in an instant-access account for emergencies, there’s no chance of you growing your money beyond the small amount your bank will pay in interest rates.Īt the other end of the scale, investing isn’t gambling. Let’s clarify what investing isn’t: at one extreme, investing isn’t stashing your cash in a savings account nor is there one magic formula to investing. Investing is essentially buying something that you think you will be able to sell at a higher price later on. This article contains affiliate links that can earn us revenue* What is investing?

This guide explains what investing is, the risks involved, and how to build your first portfolio. Buying stocks and shares can seem scary when you don’t know what you’re doing.