Happy Easter! I’ve just been reading an article about an Easter egg that costs a ridiculous £100! 1
While there are obviously people out there who are happy to shell out silly money on seasonal confectionery, it strikes me that most of us would probably be better off investing that kind of cash in a nest egg, not a chocolate egg.
Let’s look at what that £100 could achieve if it was invested, instead of eaten.
They’ve performed really well over the last 12 months, and we’d be sharing in their success.
According to industry data from financial research company Lipper, the average Stocks and Shares ISA generated a return of 11.75% during 2017 2 , for example, so that could mean we’ve just made £11.75 profit.
But, just like with any investment, there will be fees to pay first.
Holding your interest
Whereas a traditional financial adviser would on average charge you £2.56 3 , if you’d invested with evestor, those charges would be just 52p - nearly five times less.
So, after fees, we could have made £11.23 profit.
Not bad, but if we leave that profit in our Stocks and Shares ISA or GIA for another year, we’ll start to benefit from something called compound interest.
That means we are not only earning interest on our original £100 investment, but also on the £11.23 we earned last year too.
If we continue to use the average rate of return for 2017, one year on we’d have £123.65 after fees, and after another year our investment would be worth £137.46.
That would be nearly £40 profit, just for sitting on that £100 for three years rather than scoffing it!
And if you decide to make additional regular monthly payments into a Stocks and Shares ISA or GIA, you can see how your savings could grow even faster.
Take your time
Now, it’s important to point out that last year’s strong performance is no guarantee of high returns in the future.
A Stocks and Shares ISA or GIA could even lose money in any given year if the stock market performs particularly badly, which is why it’s more suitable for the long term - at least five years.
That way, if there are any bad years, they should be balanced out by the better ones, improving your chances of making an overall profit on your investment.
But we can see that, over time, by putting away relatively small amounts of cash into an investment that provides good value for money with low fees, you can build up a substantial nest egg.
Parents could use this to give their children a leg up when they leave home, or it could help fund home improvements, like a new kitchen, for example.
That would certainly last a lot longer than an expensive Easter egg!
Whatever your plans for your money, get good advice, look for the lowest fees and remember - the sooner you start, the better.
To start investing for your family’s future, register with us now.