Experts explain how small, regular sums can build wealth over time, from your 20s through to retirement. Many people are put off by the idea that you need to be wealthy to start investing, but even £50 a month is worth considering. For most, choosing funds rather than individual shares is better to spread risk.
Before investing, build an emergency fund covering three to six months of essential outgoings. Then consider your goal, time horizon, risk appetite and desired return, says Russ Mould of AJ Bell. Age is a useful rule of thumb, but the timeframe for needing the money and tolerance for volatility are more important, notes Jason Hollands of Bestinvest.
In your 20s, focus on cash savings via an instant-access cash Isa. For longer-term goals, a cautious fund via a stocks and shares Isa may suit, but growth potential is lower. Younger investors can benefit from time in the market and may consider a growth portfolio, such as the Evelyn Smart Growth Fund, with at least two-thirds in shares.
Use your goals to determine risk appetite. For retirement, a higher risk appetite may be appropriate; for a house purchase in five years, lower risk. Options include ready-made portfolios or global equity tracker funds like the Fidelity Index World Fund or HSBC FTSE All World Index Fund, with charges of 0.12% and 0.13% respectively. Multi-asset funds or Vanguard's LifeStrategy range may suit those wanting less stock market exposure.
