Growth over time

Once you've set aside some capital in your budget and want to start compounding it, investing is definitely worth consideration. In the current monetary system, you can be fairly certain the cost of goods will increase over time. You only need to look at this chart showing the change in the average price of bread over the last 50 years:

From the all-time low of 9 pence in 1971 to the all-time high of 132 pence in 2013, the price of bread saw 1467% of growth. That's an average return of 35% per year which you’re never going to get in a savings account. As the price of products goes up, so does the price of stocks and shares in the companies that are selling them. Banks invest your money to receive large returns like this, and take a healthy profit before giving you the single digit amounts per year that don't even hedge against inflation. This leads us to ask, why not invest yourself and receive all the returns? Be aware that this means you are taking all the risk, which you can minimise. If you buy a particular product because you trust the brand, it's good quality and the business is financially sound, the risk is reduced significantly. Market leaders always continue to rise over the long term and as a shareholder in that company, every time you buy their product it is a contribution to the growth of your investment.

You also need to be aware which point you're at in the economic cycle. You want to buy at the bottom of the trough and sell at the top of the peak for the maximum returns, therefore those who understand the market are buying while there is anger and depression (usually fuelled by the news) then selling while the general consensus is euphoria before the cycle repeats: 

The cycles continue at many levels, so whether you zoom in or out on a chart, you will always see these patterns forming. This helps you build a suitable strategy, whether you are making a short-term trade for quick returns, or a long-term investment when you can see there is a long route to prosperity.

To find out more about which assets are worth investing in, and the timing on when to do so, watch the FREE Market Mondays series from Earn Your Leisure, which is a great resource for market trends and strategies.

I hope you've found this information useful. Please send in any questions or feedback using the email button at the bottom of the page.