THE CASE FOR INVESTING
WHY INVEST?
To really make your pension grow over time, it’s important to understand why it’s invested in the stock market.
HOW SHARES CAN GROW IN VALUE Over the long term (5+ years) investing in shares has usually beaten other types of investment; cash, bonds and even – you may be surprised to hear – property. Over time, companies create new products, find new customers, and become more efficient. This helps them grow profits which can lead to rising share prices. That means, over long time periods, the stock market can deliver excellent returns. But this doesn’t mean share prices go up in a straight line. Share prices tend to zigzag – they go up and down more than other types of investment. This means they are higher risk and you could get back less than you put in. However, investing your pension in the stock market can give it the best chance to grow over time – and, importantly, can give you the best chance of having enough money to live off in retirement.
FUNDS
If you’re looking for an easy and convenient way to invest, funds are a great place to start.
WHAT IS A FUND?
Think of a fund as a pool of money collected from many different investors (including yourself). A fund manager invests this money in a range of investments (e.g. shares, bonds and cash), with the aim of growing it over time. Investing in bonds, cash and property helps smooth the ups and downs of investing in shares – in other words, reducing the overall risk.
FUND MANAGERS
The main benefit of investing in a fund is that a professional will make all the underlying investment decisions – the cost is then shared amongst investors. It’s the fund manager’s job to continually monitor the investments and make changes if they feel it’s necessary. This means while you should still review your investments from time to time to ensure they’re right for your circumstances, you don’t need to worry about keeping a constant watch over them.
FUNDS AT A GLANCE
- You can hold shares, bonds, and cash in one investment
- Potential to grow money over the long term
- Investment decisions reviewed constantly by a professional fund manager
- Can be a default option if you don’t want to make investment choices
- Risk of losing money, because you’re investing in the stock market