Ryan King
Accountant, Making Money Simple
With the ongoing cost of living crisis, our belts are tighter — but it’s important to carry on investing and think long-term.
One year after the bottom of the Global Financial Crisis, the S&P 500 was up 50%. One year after the bottom of the Covid-19 crash, the S&P 500 was up 57%. These were both relatively quick recoveries from global meltdowns.
The ongoing and prolonged cost of living crisis is more of a marathon than a sprint compared to these examples, but the importance of both staying invested and making further investing contributions can’t be understated.
Investing small can go a long way
Investing is more accessible than ever. On many investing platforms, we can get started investing from £1. Even during the current cost of living crisis, every £1 invested will go a long way to helping you secure your financial future. Every £1 invested today will be worth £19.84 in 30 years (at a 10% nominal rate of return, the S&P 500’s historical average).
Unfortunately, when the stock market is ‘on sale,’ people often run away rather than run towards it.
Another tool available to help us invest those extra pennies is ‘round ups.’ Becoming increasingly popular, this is where you spend £2.65 on a coffee and 35p is rounded up and invested — once again making investing very accessible. Even with tighter belts, we can get our money invested in the markets.
Don’t stop investing where you can
If you’ve already invested, then the best words of wisdom are to carry on investing. Invest what you can afford each month, and continue to do this throughout the cost of living crisis.
This may sound strange, but the market falling is a good thing for us long-term investors. Let’s say you went to the supermarket and steaks were 50% off. You’d be over the moon and probably buy a few more steaks.
Unfortunately, when the stock market is ‘on sale,’ people often run away rather than run towards it. But just like with steaks, if the market does fall due to the cost of living crisis, use this time to buy more shares/units of your favourite stocks/funds while their price is lower. By taking the opportunity, you’ll then hopefully enjoy more long-term gains. Stop waiting, start investing and continue to invest — even during these tough times.