We have reached a point in time where inflation is high, interest rates are relatively low (although rising), and generous occupational pensions are a thing of the past.

But on the positive side, technology now means that it is easier than ever to take control of your own financial planning. The tools, platforms, and information available online make investments accessible for everyone, even if you can only set aside a few pounds a week.

But multiple options and too much (sometimes conflicting) information can make the whole process overwhelming. Many people put off investing until they have a higher income, fewer commitments, or a major spend is out of the way. The reality is that there are always other priorities competing for attention and making it easy to neglect your future financial security.

A common barrier to getting started is a tight budget. If you can only spare a small amount each month, you might think that it’s not worth investing. But there are a couple of tricks in a financial planner’s toolbox that you can apply to your own investments. Once you get to grips with these simple principles, investing for the future will seem much more worthwhile.


Pound Cost Averaging

Investing for long-term growth means accepting some volatility. Share prices fluctuate on a daily basis, and can sometimes take a prolonged dip. There is no ‘right time’ to invest and there is always the risk that prices could fall immediately after you invest.

Buying low and selling high is the goal of investing, although it is very difficult to achieve consistently. But investing every month can allow you to take advantage of the highs and the lows. This phenomenon is known as pound cost averaging.

When markets rise, investors make more money. But a market fall can also work in your favour, as lower share prices mean that you can buy more for your money. This will boost your investment pot when the market recovers.

Monthly investors are also able to spread risk, as even if the market falls, you are not committing a large sum in one go.

Time in the market is key, and there is no guarantee that a monthly investor will end up with a larger pot than a lump sum investor. But as the market moves up and down rather than in a straight line, it is certainly possible, especially when the investment is held for a long period.


Compound Growth

Albert Einstein called compound interest “The most powerful force in the Universe”

You may have heard of compound interest, but compound growth is even more powerful. It means that if your investment grows by 5% in year 1 and the same in year 2, it will actually increase by 10.25% instead of 10%. This is because any growth you achieve is added to your pot and will continue to produce returns.

An extra 0.25% may not seem significant, but over a long investment timeframe the difference is massive.

Returning to the example of the global tracker fund, this has returned an average of 7.7% per year over the last 5 years, or 38.5% in total simple terms. However, the compounded return over this period has been 45.1%. This means that the investment value has been enhanced by over 6.5%, purely as a result of compounding.


If we assume a more modest average return of 6% per year after charges, compound growth could have the following impact on your investments:



Monthly Contribution


Total Invested

End Amount

Saving for a Property Deposit


ISA or Lifetime ISA


10 years



Investing your child’s Child Benefit


Junior ISA


18 years



Saving for Retirement


£150 net (£187.50 gross)


30 years

£54,000 (before tax relief)


Pension for a Child


£250 net (£300 gross)


60 years

£180,000 (before tax relief)




This demonstrates how compound growth, over a period of time, can make a huge difference to your investments. The earlier you begin, the more benefit you will see, even if you are starting with a small amount.

If you keep the cash in the bank, not only will you miss out on growth, but inflation could easily reduce the real value of your money.

Pound cost averaging and compound growth are just two factors that can affect your investment plan. You also need to ensure your investments are well-diversified, take a suitable amount of risk, and don’t pay an excessive amount in charges. Beyond that, sticking to your plan and leaving your funds to grow is the best way to achieve long-term returns.

This article is for general information purposes only and should not be construed as financial advice or a personal recommendation. If you require advice on your own financial situation, you should contact a financial adviser who is authorised and regulated by the Financial Conduct Authority (FCA).