Why should we invest?

We know about saving...

We all know that saving money is a good thing; some do it in a bank account, others put it in a jar, while some might plough it into property. No matter how we do it, the essential idea is the same: we are all saving for something in the future.

But what about investing?

With investing the idea is exactly the same: we are putting money away for something in the future, be that buying a house or for our retirement.

Over long periods of time, typically three years or more, investing usually grows your money more than just leaving it in a bank account. This is particularly true of the past ten years, as the average savings account has only got you 1% per year or £1 for every £100 you’ve saved.

The longer you leave your money invested, the more chance it has to grow, while any market tumbles will be smoothed out over time.

However, like most things, investment returns are not guaranteed. The value of your investments can - and will - go up and down, and you may not get back all you invested. The longer you leave your money, though, the less chance there is of this happening.

Contrary to popular myths, investing really isn’t that hard or difficult. With The Big Exchange we want to open investing up to everyone - not just the few.

What’s different about investing on The Big Exchange?

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Traditional investing

Investing in companies that aim to make you money. The only objective is that over time it aims to keep growing your money. The money may not support companies that you agree with or that are in the best interest of future generations.

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Investing in People & Planet

The Big Exchange only offers rated investments where we can see that they are having a meaningful and measurable positive impact on the world. These investments aim to deliver you a financial return as well as help both people and the planet.

Things to know before investing

Here are three simple things to consider before investing:

Know what you can afford to invest

Making money is not guaranteed so make sure you are not investing money you rely on for day-to-day life.

Pay off any expensive debt first

Any debt you have on things like credit cards, overdrafts and short-term loans could cost you more than investing will make you. Look into paying this down first before investing.

Give your investments time

Change doesn’t happen overnight! Set a long term goal and don’t tinker too much - especially when markets look rocky (selling at a loss is rarely best). Remember: the longer you leave your money invested the better.

How you can get started from £25 a month

If you are new to the world of investing putting some of your money into a fund might seem daunting: but it doesn’t have to be.

The graph below shows the difference between investing £25 per month and saving it in cash over 50 years. It is based on the current long-term performance of the UK stock market versus a basic cash account over this period.*

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Jill and Cameron both start putting money away at the same time. They put £25 a month away for 50 years. Jill decides to invest it in investments on The Big Exchange, tax-free in her ISA and Cam saves it away in a zero-interest bank account.

Jill

By investing her £25 per month, Jill has seen her savings grow by an average of 5% per year, or by £5 for every £100 invested. Thanks to the way interest builds on interest (compounding), she earns more and more on her investment return every year.

Cameron

Cameron has saved his £25 per month into a cash account, which means his savings have grown much less than Jill’s. This is because, typically, investing beats cash for returns over a longer period of time.

This is a conservative assumption based on the average annual return of the FTSE 100 over the 25 years prior to 2018. As is the nature of markets, there will have been years that the value of Jill’s investments fell. But as she kept her money invested, these falls smoothed out over time.

Investing can make your money work harder for you

Investing over long periods of time typically makes your money work harder for you than leaving it in a cash account. There will be ups and down, but usually long-term, prudent investors win out in the end. That’s why all pensions are invested in financial markets (unless you’re hiding yours under the bed).

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By joining The Big Exchange, you’re doing a lot more than making your money work harder for you and others. You’re helping to start a movement that will transform the lives of millions of people by building a fairer financial system that works for everyone.

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