Five reasons to consider investing

1. Potential for higher growth than savings

The aim of investing is to grow the value of your money. Investing over longer time periods generally offers better returns than interest rates on cash savings.

However, it is important to remember that with investing there is the potential for losses, which means you might get back less than you invest. But, if you’re willing to accept some risk, there are potential rewards.

2. Compound growth

Any profit or gains made on your investments are known as investment returns. Reinvesting any returns offers the potential of future gains – not just on the amount you originally invested but also on those invested returns.

Known as compound growth, it can substantially increase the value of your investments over time.

3. Impact of inflation

Inflation is the rising cost of goods and services over time. If interest rates on savings are low, or if inflation is high, this can eat away at what your money can buy.

The balance of your cash savings may not go down (unless you take money out). But, when the cost of things rises faster than the interest you’re getting, your money falls in value in real terms. In other words, you’ll be able to buy less with it.

Investment returns are not guaranteed. However, over longer periods investing tends to offer more chance of your money growing faster than inflation compared with saving in cash.

4. You have longer-term goals

Longer-term financial goals might include:

• Saving for a house deposit
• Covering the cost of a child’s education
• Putting money away for your retirement.

For many people, their first instinct might be to save in cash. But, for longer-term goals like these, you may find investing a better option than saving.

One reason is that, over time, inflation can erode the real value of your money. And the longer you have to reach your goal, the greater this risk becomes.

Also, markets can experience sharp, short-term ups and downs. This is normal and is know as market volatility. 

But accessing your money when markets have gone down may mean you don’t get back the full amount you invested and you accept some loss.

Investing for longer term goals (at least five years) gives you the chance to ride out any temporary falls in value.

5. Anyone can invest

Think investing is complicated or only for wealthy people? It isn’t.

Investing can be for anyone who:

• Understands the risks that come with it
• Is willing to take those risks for the chance of greater reward
• Has money left after covering the essentials every month.

If you’re worried about investing being complicated, many stocks and shares ISAs offer ready-made investment options with different risk levels. So, you can choose one which most closely matches how much risk you’re comfortable taking with your money.

As for investing only being for the wealthy, you can start investing with a very small monthly amount. For example, investing £50 a month is the equivalent of just £1.64 a day over a year.

Are there reasons not to invest?

While there are benefits, investing also comes with some risk. Not only is there no guarantee of investment growth, but your investments can actually fall in value. The value of all investments can go down as well as up, so you may get back less then you paid in.

Think carefully about how much risk you’re comfortable taking and how much risk you can afford to take. If the idea of losing any money on investments worries you, then it might not be the right option for you. Similarly, if you can’t afford to lose the money you’ve invested, you may prefer to save your money rather than invest it.

Calculators such as Royal London’s Risk Profiler can help you identify how much risk you’re comfortable taking – your attitude to risk.

Is investing right for you?

If you’re still unsure whether you're ready to invest, take a look at our handy guide Investing for beginners. It covers key things to consider before you start investing.

How to get advice

Another option is to speak to a financial adviser. If you don’t have one, you can find one here. Advisers may charge for their services, but should agree fees with you upfront.