For those new to investing, see it as a way to nurture your savings, to give what you have accumulated the best opportunity to go further.
Your “Rainy Day Fund”
Whatever your ambitions we always recommend that you retain a ‘Rainy Day Fund’ – a certain amount of savings in cash, which you can draw upon in a moment of need. For anything that you are leaving for the long term, investing becomes a critical tool to preserve or grow the value of what you have.
Data from the Barclays Equity Gilt Study has shown that taking a long term approach to investing in the stock market has delivered a significant real return over the last 116 years, at an average of over 5% (above inflation). To use an example over a shorter period, if you had invested £100 in the UK stock market in 1978 and saved another £100 in a Building Society, your Investment statement might now read £1444 versus the Building Society at £158.
The power of one pound
Whilst only a simple illustration, it highlights the potential of every pound and the importance of the principle of Compounding – which Albert Einstein is said to have described as the eighth wonder of the world.
Consider compounding a potential exponential multiplying force for every pound that you save. Whilst there can never be any guarantees, think of it as the ability to earn interest on your interest, or when it comes to investing – returns on your returns. Thus the longer you are able to invest for, the longer your savings will have to grow.
Over the course of a year the effects of compounding might only be slight, but over 30 years the difference becomes vast. Therefore investing regular amounts can be far more effective than saving one big lump sum and investing it in one fell swoop; with the latter, all those pounds you set aside on day one would miss a year’s worth of interest. The same principle applies for reinvesting any dividends or income you might receive from any investments.
a personalised investment plan
A deep understanding of the markets is the foundation upon which Killik & Co is built and remains the lifeblood of our talented team. Crafting a personalised investment plan and portfolio that matches both your level of investment experience and interest allows us to navigate through these inevitable ups and downs in the market, balancing any risks with the potential rewards to help meet your ambitions. Whilst the very nature of investing means that nothing is guaranteed, analysis (again from the Barclays Equity Gilt Study) has shown that the longer you invest, the more consistent your returns are likely to be. This is why we take a long term approach to your investments with us, and treat them as Lifetime Savings, unless you request otherwise. Even those approaching life after work may easily have another 30 years ahead of them and will still need to beat the effects of inflation. The graph we have created below shows how dramatically the likelihood of making a gain becomes the longer you are invested, which lies at the heart of our Lifetime Savings investment philosophy. Of course we cannot assume that what has happened historically will be repeated.