Investing

When you invest, you give up using money today in the hope of having more in the future. The return comes from income, such as interest, dividends or rent, and from increases in the value of what you own.

Investing differs from saving. Saving usually means keeping money safe and easy to reach, often in a bank account, with little risk and modest returns. Investing accepts some risk, including the possibility of losses, in exchange for the chance of higher returns over time.

The longer the time horizon, the more powerful investing becomes, because returns can compound. If 10,000 earns an average of 6% a year, it grows to about 17,900 in ten years and about 32,100 in twenty, though actual returns vary from year to year and are never guaranteed.

Sensible investing usually involves knowing your goals and time frame, spreading money across different assets to reduce risk, keeping costs low and avoiding decisions driven by short-term fear or excitement. Money that may be needed soon is usually better kept in savings than invested.