When I started saving a little from my first job, I didn’t even know a Stocks and Shares ISA existed. I dallied for years with poor investments. I don’t even want to calculate how much my lack of knowledge and action cost me
If was starting again today with £3,000, I’d make a very simple investment. It’s one that would be considered ‘risky’ to some people and ‘dull’ to others. But a simple calculation shows it could lead to £52,000 as I’ll explain in a second.
And the first investment is vital. I know this very well as my early attempts at making my money work for me were pitiful. I don’t think I made a single good move for years.
Frittered away
For instance, my first attempt at investing was with a savings account. My first month I didn’t even get £1 in interest.
Property was another investment I looked at. Putting the deposit on a house would likely have turned out lucrative, but a fixed abode would have been a chain around my neck.
My next move was even worse. I didn’t invest in anything. I assumed making a good return on my money was impossible for a small-time saver so I gave up.
The turning point was when I was exposed to the past performance of stock markets. For example, here’s the long-term record of one of the most popular markets to invest in a Stocks and Shares ISA – the US S&P 500.
Chart from slickcharts.com
That market boasts an average yearly return of over 10%. A rate that high would grow even a smallish sum like £3,000 enormously given time to compound.
After 30 years, it’s worth £52,348. After 40 years, it’s worth £135,778. Does that seem right? Perhaps not. Let’s look at the following table to show how a 10% increase breaks down year by year.
Year
Total
Year
Total
Year
Total
Year
Total
1
£3,300
11
£8,559
21
£22,201
31
£57,583
2
£3,630
12
£9,415
22
£24,421
32
£63,341
3
£3,993
13
£10,357
23
£26,863
33
£69,675
4
£4,392
14
£11,392
24
£29,549
34
£76,643
5
£4,832
15
£12,532
25
£32,504
35
£84,307
6
£5,315
16
£13,785
26
£35,755
36
£92,738
7
£5,846
17
£15,163
27
£39,330
37
£102,012
8
£6,431
18
£16,680
28
£43,263
38
£112,213
9
£7,074
19
£18,348
29
£47,589
39
£123,434
10
£7,781
20
£20,182
30
£52,348
40
£135,778
And if I want this kind of growth, a large market index fund is a no-brainer for a first investment. I can invest in the S&P 500 as I mentioned above. The FTSE 100 is the closest UK equivalent.
My own first investment was a world tracker. Diversifying across the world appealed to me. I still hold the fund today and it’s been very lucrative.
Which country’s economy will perform best over the next decade or two? Will it be China? Or the UK? India? Or maybe America? It doesn’t matter to me. I have exposure to all of them.
The best place
Investing broadly does limit the potential upside. I get the average return, not the extraordinary one.
Choosing individual stocks is a way to increase my return. While I still recommend index funds as a low-risk first step, my own journey moved towards a balanced portfolio of funds and shares. I like the greater control over what I’m putting my money towards for one thing. The chance for higher returns is a nice extra too.
However I invest, making money isn’t guaranteed. The historical record is outstanding, but that’s the past. The future is unknown.
Yet even with these risks, I think the stock market is no better place for a first £3,000 investment in an ISA.
The post Start investing today? Here’s where I’d put my first £3,000 in a Stocks and Shares ISA appeared first on The Motley Fool UK.
British CEO gobbles up £238,000 of own stock
What company does he run?
And why is he so confident in its long-term potential?
This new report – ‘One Top Growth Stock from The Motley Fool’ – reveals the full details, both risks and opportunities. Some of which you may find frankly, unbelievable.
Though past performance does not guarantee future results, over the past 5 years, it’s seen consistent:
Double-digit revenue growth
Returns on capital almost 600% the UK average
Now, profits are exploding again – up 46% in 1 year!
It’s no wonder insiders are buying this stock hand over fist. Last year, they bought a total £492,000 of shares. And now might be the ideal moment to join them.
So please, don’t miss this report, ‘One Top Growth Stock from The Motley Fool’ Including both risks and opportunities.
Secure your FREE copy now
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
The Rolls-Royce share price is still surging! Will this continue in 2024?
3 FTSE ‘value’ shares I’m avoiding like the plague in 2024
A 10% yield but down 32%! Is this FTSE stock now too cheap to ignore?
2 passive income stocks yielding at least 10% right now
If I’d invested £1,000 in Centrica shares at the start of the pandemic, here’s how much I’d have now
John Fieldsend has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
