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.