We have made the case for investing versus just saving money many times here at The Savvy Scot. Why? Returns. Simply put, these days a “high yield” savings account will give you 1 or 2% interest per year. That is barely enough to keep up with inflation. On the other hand, the S&P500, an index tracking 500 major US companies has returned over 8% the past 30 years. Does it make a big difference? Yes, a huge one.
Say you save £100 per month, and get 1% on your saving account. Over the next 30 years, your nest egg will grow to £41,997.
Instead, if you were to get 8% returns by investing the same £100 on the markets for 30 years, you would get £150,029.
That is how powerful returns and compound interest are. Over £100,000 that are simply your money working as hard for you as you worked to save it.
But how do you get started? Index funds are a good place, since you don’t need a lot of knowledge to start investing. As you get the hang of it and become an amateur investor, there are tools that can help you analyse the trends and make an informed decision before you enter a trade.
SIGNItrade for example is a free online platform that has been created to assist both novice and professional investors.
One thing that is often recommended when you invest is to invest in what you know. Products you use every day, or you see other people use a lot. So I had a look at IHG, the Intercontinental Hotel Group.
SIGNItrade does the hard work for you, by analysing market trends and highlighting what’s good and also what’s bad. In one click, you will clearly see red, green or neutral signals providing even novice investors an edge on the market.
In one click, you can see the number of shares on the market, the earnings and dividend yield, and how the stock has performed over the past year.
SIGNItrade analyses other financial signals such as the MACD, a moving average indicator, the RSI or relative strength index, and other metrics to define price movements.
All you need to know about a stock is there, and on top of that, you can also get detailed information about a business sector, such as Oil and Gas, Travel and Leisure, or Automobiles and Parts.
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The report gives you the 1 day, 30 day, 60 day and 90 day change for that sector, as well as a signal whether the data collected is bullish (prices should go up, so you should buy), bearish (prices should go down, so you should sell or hold on to your trade until it goes back up again), or flat (stable prices are expected for the moment.
The platform is pretty intuitive to use, and you are then presented with the option to place your trade in there if you wish to.
Notwithstanding, the access to all the data is free for you to browse before you decide on anything.
Remember that with greater returns come greater risk, and you shouldn’t invest any money you can’t afford to lose. Because markets are volatile, investing is generally a long term endeavour, so you have time to recover from the low growth periods. Investing for retirement can be very rewarding, as the initial calculations show. However, if you invest too much and need to withdraw early, you might do so at a lower price than you bought, which would be bad for your retirement plans. So invest small sums, keep going for a long period of time, let compound interest work its magic, and you should have a safe financial future.