How regular investment could be your most rewarding financial habit
A regular investment habit might sound too simple to have much impact. You set up a Direct Debit, the payment goes straight into your investments, and that’s that.
Actually, this straightforward transaction is quietly one of the most effective wealth-building strategies available.
Here, our financial planner Jon Mulshaw gives his opinion on why this monthly habit could help to shape your financial future.
The power of compound growth from regular investments is transformational
Here’s a question for you. What’s the difference between someone who invests £10,000 once and someone who invests £200 every month?
You might find the answer surprising. And it’s not just about the total amount.
What I’m talking about here is compound growth. When you invest regularly, you’re not just saving money. You’re helping your returns generate their own returns, and in turn, these returns generate additional returns. And so on.
Let’s look at an example.
You invest £300 a month for 20 years.
At a 7% annual return, which is roughly the average for a diversified portfolio, you won’t just end up with the £72,000 you put in.
You’ll have over £155,000.
The extra £83,000 is compound growth doing the heavy lifting, while all you had to do was keep up your monthly payment.
Meanwhile, if you invest an initial lump sum of £10,000, at the same rate of return, after 20 years you’ll have around £38,600.
Not difficult to spot the difference.
How pound cost averaging gives you time in the market, instead of timing the market
The benefits don’t stop there. When you invest the same amount each month, you automatically buy more units when prices are low, and fewer when they’re high.
This is known as pound cost averaging. When the markets dip, your £300 buys more units. When they’re riding high, it buys fewer. Over time, this balances out – you’re not trying to time the market, you’re spending time in the market.
This means you can ignore the headlines, forget the emotion, and not have to worry about whether now is the right time.
Your payments quickly become part of your monthly budget
The beauty of regular contributions is that they fit into your life rather than disrupting it. Most people find it easier to commit £300 a month than to suddenly find £3,000 for a lump sum investment.
This “pay yourself first” approach fits your monthly budget, just like a gym membership or mobile phone bill, but instead, you’re building your future wealth.
It’s not about depriving yourself now. It’s about giving “future you” more options, helping you achieve goals such as retiring early, supporting your children with a house deposit, or taking a career break.
Even £100 a month makes a difference over time. The key is consistency and time in the market.
Consider this. If you begin investing £200 a month at age 30, you will likely end up with more at 60 than someone who started investing £500 a month at age 45, even though the second person is contributing more.
The real beauty of this type of quiet, regular investment is that you don’t need to do anything other than be consistent.
Wealth isn’t built dramatically; it’s built through steady, unremarkable, regular habits.
Get in touch
Got questions about setting up a regular investment? Feel free to reach out, and we’ll be happy to help.
Email us at info@andersonfinancialltd.com or call us on 020 8943 0065.
Please note
This article doesn’t constitute personal financial advice; it is a general opinion.
Past performance is not indicative of future results. The value of investments can go down as well as up, and you may not get back the original amount invested.
This content is for educational purposes only and should not be relied upon as the basis for any investment decision.
Please ensure any investment is suitable for your specific circumstances and seek professional advice where appropriate. I am regulated by the Financial Conduct Authority.