Personal Finance

The Power of Compound Growth

The Power of Compound Growth

Did you know that as well as earning returns on the money you invest, with compound growth you also earn returns on your returns?

For example, imagine you invest £10,000 and it grows by 5% to £10,500 – an increase of £500. If you keep your money invested, you’ll now start to make returns on £10,500. The same 5% rate of growth would now earn you £525.

That’s the secret of compound growth. If you get started and stay invested over the long-term, it takes care of itself. The longer you remain invested, the greater the potential returns on what you’ve already invested.

Adding a Direct Debit

Regular investing by Direct Debit helps you do even more with compound growth as it ensures you’re always topping up the amount you’re earning returns on. This means that you can add the same amount each month, but the returns have the potential to keep growing.

In this example, a £300 monthly Direct Debit starts off with a return of £99 in the first year, but  by year 15 the total compound growth on your investment of £54,000 is £26,500 (assuming a 5% annual growth rate after fees), giving you a total pot of £80,500.

That’s the power of automating your investing, so you never miss a payment, and compounding growth over the long-term.

If you haven’t yet set up a Direct Debit, it’s a simple process that you either take care of yourself or we can guide you through.

With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. Past performance is not a guide to future performance. Tax rules can change at any time. Please be aware this communication should not be considered as financial advice.