Successful investing doesn’t have to involve anything too complicated or flashy – your aim should simply be to get rich, slowly. Unlike the security offered by cash, investments will always rise and fall in value so you could get back less than you invest, But following these three rules could give you the best chance of long-term success.
Remember, investing isn’t for everybody. Saving tends to be for the short term (less than five years), while investing is for the longer term (five years plus). In the short term, it’s a good idea to build up ‘rainy day’ cash savings you can easily withdraw if you need to. Longer term, you could consider investing as a way of growing your money.
1. Find the right level of risk for you
Your attitude to risk is personal. Think about what’s right for you and your financial goals. That way, you can find the right balance between risk and reward.
Ignore any get-rich-quick schemes and any promises of guaranteed, sky-high returns. You don’t need to spend much time scouring the internet to find people who are willing to sell you the hype. Whether the message comes from a social media influencer or the more traditional door-to-door salesperson, you should be wary of taking unnecessary amounts of risk.
Equally, you’ll want to make sure you’re taking enough risk to get an appropriate return on your money, which is where investing can help. It’s all about balance.
Learn about how to approach risk and reward
2. Think long term
If you want to take advantage of one of the most powerful forces in investing, you’ll need to be in it for the long term. Put simply, compounding is a way of making the most of the growth on your growth.
For the sake of round figures, let’s assume you get 10% growth a year on an investment of £100. This isn’t a realistic return, but the maths is clear.
You might think that five years would give you 50% more, so £150. However, compounding magnifies this. On year one you get 10% of £100, which is £110, but year two, instead of getting another 10% of £100, you get 10% of £110. This means you end up with £121. If you keep going, by year five you’d have £161.
This is just an example and individual investment performance will vary. Past performance isn’t a guide to the future and no return is ever guaranteed.
Read more on the power of compounding
3. Keep up momentum
One of the easiest ways to keep your investing momentum going is to set up a monthly Direct Debit.
You can get started from £25 per month, which works out as less than £1 a day. Over time, investing every month could help you build substantial savings.
Assuming a growth rate of 5% a year and average investment charges of 1.25%, this table shows how much a monthly investment could be worth in future. Your own charges could be lower or higher, depending on the investments you hold. We haven’t factored in inflation.
| Time period | £50 per month | £100 per month | £300 per month |
|---|---|---|---|
| 5 years | £3,288 | £6,577 | £19,732 |
| 10 years | £7,242 | £14,484 | £43,453 |
| 20 years | £17,707 | £35,415 | £106,246 |
This is an example only. Actual returns will vary depending on the investments you choose. These calculations don’t take taxes into account.
Find out more about investing by Direct Debit
3 get-rich-slow share ideas
Sophie Lund-Yates, Lead Equity Analyst
Investing in an individual company isn’t right for everyone because if that company fails, you could lose your whole investment. If you cannot afford this, investing in a single company might not be right for you. You should make sure you understand the companies you’re investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio.
This article isn’t personal advice. If you’re not sure if an investment is right for you, seek advice. Investments and any income from them can fall as well as rise in value, so you could get back less than you invest. Yields are also variable and not a reliable indicator of future income.
Overseas dividends can be subject to withholding tax which might not be reclaimable.
Bunzl
Bunzl is a hoard of well over 100 businesses which source and deliver a range of essential products. It covers everything from food packaging to safety equipment. Nothing glamorous, but that’s where its strength lies.
By providing essential goods and services, it’s in a better position than some other businesses. It also generates a lot of cash which has fed into a multi-decade history of dividend growth, remember all dividends are variable and not guaranteed.
Bunzl has a lot to offer and is well-positioned for the long term. Its valuation is ahead of peers, which adds a level of pressure. But then again, quality usually comes at a price.
See Bunzl share price and research
Buy Bunzl shares in three simple steps
LVMH
LVMH – the French luxury conglomerate behind Louis Vuitton, Christian Dior, Tiffany & Co, Moet and Hennessy to name a few, is a best-in-class option for the luxury sector.
LVMH's mega-wealthy customer base are able to weather an economic downturn better than some. Spending is more reliable when things take a turn for the worse, which helps keep revenue, margins and cashflow ticking along nicely.
Adept management is a serious asset too. The group has Bernard Arnault, CEO for the best part of five decades, to thank. He’s also the group's largest shareholder – his family owns 48% of the shares, which probably explains the focus on long-term success.
The prospective yield of 1.7% doesn't shoot the lights out, but LVMH’s shareholder returns seem less vulnerable than some other businesses. LVMH is well positioned to thrive over the long term and could provide a compounding opportunity thanks to its unrivalled stable of brands.
But keep in mind, the group's valuation is relatively demanding these days. This increases the risk of ups and downs.
See LVMH share price and research
Buy LVMH shares in three simple steps
Volvo
Volvo Group isn’t the car company you might be thinking of. That was sold years ago. It’s now a truck and machinery giant.
Trucks might not sound like the most high-octane investment area, but over the long term Volvo is well positioned. The group has very high barriers to entry thanks to the complex and expensive nature of its manufacturing and supply chains.
Volvo also has enviable visibility over demand. The order intake for trucks was well over 200,000 last year as customers replaced old trucks and expanded their fleets. Fleet upgrades should be seen as an ongoing source of growth.
Volvo not only produces vehicles, but services them. A 24/7 global servicing support network is a serious asset. If your truckful of goods is stuck somewhere, you need to have faith it can get moving ASAP. That feeds into more reliable revenue.
It’s also a leader in the electrification of heavy-duty vehicles, including trucks and buses. Volvo wants over 35% of its vehicle sales to be electric by 2030. Being a front-runner of sustainable haulage is a real plus point.
Volvo is a steady-Eddie with longer-term growth potential. Progress can’t be knocked so far, but the wider economic environment remains uncertain which means ups and downs along the way can't be ruled out.
See Volvo share price and research
Buy Volvo shares in three simple steps
The only investment you’ll ever need?
If you’d prefer to the leave the day-to-day investment decisions to the experts, our new ready-made options could help. Each can be used as an all-in-one investment – pick from the different risk levels and you’re good to go.
You’ll just need to check in every now and then to make sure it still meets your needs and circumstances.
Learn more about ready-made investments
Unless otherwise stated, estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates aren’t a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.
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