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Why Invest?

Why Invest?

It is important that the money you put aside works as hard as possible, to help you meet your future financial goals.

Keeping money in cash savings account (rather than in other asset types such as stocks and shares or investment funds) is often considered as low risk. But low risk, doesn't mean no risk.

If you only put money into cash savings accounts, your future returns may be limited and will be linked to the level of interest rates applied to the account. One of the reasons for investing is to help your money potentially outperform inflation.

Please remember the value of investments and any income can go down as well as up and you may get back less than you invest.

Outperforming inflation

Simply put, inflation is a measure of how much you can buy with your money, or what it is 'worth' in real terms (£1 today, for example, buys you much less than it would have 30 years ago). The Bank of England (BoE) is predicting average annual inflation (as measured by the Consumer Price Index - CPI) to rise to 1.2% by Q4 2016, with a longer term target of 2% (Source: BoE Inflation Report Nov 2015).

For the purposes of this illustration, let's assume that the rate of inflation is 2%. If you put £10,000 into a bank account with 0% interest, in real terms it would be worth:


So, unless you put your money into an investment solution where the potential return outperforms inflation, it’s value could decrease over time.

Investment risk and reward

It’s important to aim for ‘real’ returns from your investments that beat inflation over longer time periods. You can achieve this by having the right mix of investments in place. Putting your money into assets other than cash (such as bonds, property, or shares) carries different levels of investment risk.

By taking on more risk, you can generally give your money a greater opportunity to grow over the long term. Putting your money into higher risk investment assets (such as property or shares) can potentially lead to higher returns over a longer period.They may give you real returns over and above the rate of inflation but it’s important to remember that the value of your investments could fall, and you may get back less than you put in.

Essentially, aside from cash, there are three main types of investment:

  • shares (or equities)
  • fixed interest (or corporate bonds and gilts)
  • property

We’ve put together a useful guide to help you understand the range of options available: A guide to investing

Your reasons to invest

Failing to clearly identify your reasons to invest can mean you run the risk of not being able to afford the things you want, because you didn’t put the necessary financial plans in place early enough. We conducted research asking over 400 professionals what they were investing for - top of their lists included:

Reasons to invest

 New car Once in a lifetime
Deposit for a new house Reserve to cover 9 month's salary Reserve to cover 10 month's salary Child's School & University fees Deposit for  child's house 
Teachers   X      X     X       X  
Lawyers  X      X      X   
Dentists       X      X        X 
Doctors  X      X     X      X       X

Research based on a survey of 417 professionals, (including 106 teachers, 100 lawyers, 109 dentists, 102 doctors) by Censuswide on behalf of Wesleyan, March 2015.

Potential investment benefits

As well as out-performing inflation there are a number of other potential benefits to long-term investing. You may want to invest in order to:

  • try and outperform low interest rates – if your money is kept in a fixed rate savings account your returns are predictable, but growth potential may be limited
  • create a future income stream – money you invest today could be used to provide you with a future income stream in later years
  • reduce the amount of tax you pay – certain types of investment returns are free from Income Tax and/or Capital Gains Tax
  • help plan your retirementthe amount that you can save into pensions, before incurring additional tax charges, is limited. Many people are attracted to investing as an alternative way to save for a more comfortable, or earlier, retirement
  • spread the risks – holding your money in a range of asset types (such as stocks and shares, cash, and bonds) can help you to spread the risks of market volatility (such as movement in the property market or stock market downturns)

Reasons to invest for your children’s future

Investing can really help you to give your children a head start, building funds over time to provide money towards:

  • school and university fees (including funding gap years)
  • weddings
  • mortgage deposits
  • giving them a head start in their retirement planning

When it comes to safeguarding your children’s future, we have solutions that will allow you to control the savings you and your family make towards their future.

Short- or long-term investment

By establishing clear reasons to invest, you can identify the appropriate timeframe for your investment and whether medium term (5-10 years), or long-term (10 years or more) might be best for you.

This simple consideration will help you to identify:

  • how much you will need to invest each month, or year, in order to stay on track towards meeting your goals
  • whether there is time for your investment to grow and ride out potential fluctuations within the financial markets

Investment benefits and returns

Access our easy to use calculators to help you understand: the potential benefits of investing sooner; your potential investment returns over time; the impact of inflation on the value of cash savings.

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Guide to investing

  • We've put together a useful guide to help you understand the range of investment options available: A guide to investing

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Wesleyan Assurance Society and Wesleyan Bank Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Financial Services Ltd, Wesleyan Unit Trust Managers Ltd, Practice Plan Ltd and DPAS Ltd are authorised and regulated by the Financial Conduct Authority.  Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd.

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