Very simply, it’s buying a piece of something that could go up in value. So when you choose to sell it, you could get back more than you paid for it, although that’s not guaranteed. All investments can go down as well as up in value, and you could get back less than you paid.
You can invest in lots of things, including shares in companies, loans to companies and governments (bonds), as well as more physical, tangible things such as gold and property.
When you put your money in a savings account or Cash ISA it’s generally secure, and you’ll earn a small amount of interest. But by investing your money, you’re giving it the potential to grow more in value.
Not only that, the longer you can leave your money invested, the more potential you’ll have for it to benefit not only from growth on the money you’ve invested, but also growth on any investment growth. This is known as compound growth, and can add up to a large part of the final value of your investments.
Remember of course that investment growth isn’t guaranteed, and investments can go down as well as up in value.
Inflation erodes the buying power of your money. As living costs rise, your money doesn’t go as far.
If prices rose 5% a year for the next 10 years, £100 in your pocket today would only be worth £55 in 10 years’ time.
Unfortunately long gone are the days when you could expect to earn a reasonable rate of interest by putting your money in a savings account or even a Cash ISA. And even though interest rates are moving upwards again, they’re unlikely to reach a level where they’ll outstrip inflation, which is currently rising quickly.
Although the value of all investments can go down as well as up, and you could get back less than you paid in, over the longer term investing your money can give it more potential to keep pace with or even beat inflation than simply saving it.
Our Stocks and Shares ISA is a quick, simple and competitively priced way to start investing. And with our easy investment option, all you need to do is decide how much risk you’re comfortable taking. abrdn’s experienced investment experts will then manage your investments for you.Open an ISA