Is it too late to start investing and expecting a decent return?

NithyaH

Albermarle said:

NithyaH said:

Hoenir said:

Investing for the longer term will generate you a better return than simply putting cash on deposit. Whether the return can be considered as decent is subjective. I wouldn't plan on it making you wealthy in retirement. Merely comfortable. As investment returns cannot be guaranteed. The "decent" return is the reward for the risk taken. Along the way it may well feel as if your are riding a rollercoaster. Plug away saving every month and let compounding perform the heavy lifting for you. 

I think this is right.  We may not get the returns enjoyed over the last couple of decades.  Still, 2-5% above inflation over 30-odd years should be enough for most to be comfortable, if not wealthy.

The growth rate is less important than how much you actually put in.
A growth rate of 5% above inflation is not going to make you rich if you only add £50 a month.
Conversely you should be OK if you add a £1000 a month, you should have a nice big pot after 30 years even if the growth was a bit aneamic.

Absolutely right. I was taking it as given that a reasonable % of salary will be contributed.

silvercue

savememoneyplease said:

Hi guys

I am 46 and have just lost a chunk of money in a divorce. I have a basic pension but i've only put into it for a couple of years and now have no savings.

While I build my money back up, is it worth putting some into investments as well? Just something simple like Vanguard? Or is that something you should start in your 20s?

I am a few years older than you and only started really looking at my pension and investments and debt (mortgage)  in the last few years, so I started older than you are now. 

It is certainly not too late as you can make a real impact in 5 years.  Sure, I wish I had started earlier, but most adults in the UK don't even invest at all. 

So my advice is don't hesitate, you have lots of time to make a real impact.  

OldScientist

savememoneyplease said:

Hi guys

I am 46 and have just lost a chunk of money in a divorce. I have a basic pension but i've only put into it for a couple of years and now have no savings.

While I build my money back up, is it worth putting some into investments as well? Just something simple like Vanguard? Or is that something you should start in your 20s?

As others have said, the relatively short time to accumulate makes your life harder, but not impossible. The rule of thumb (it is on the pension pages here) is that committing a percentage of your salary to your pension equal to roughly half your start age gives a reasonable pot for retirement. In your case, this would imply saving about 23% or so of your salary.

The maths of accumulation is fairly easy to implement in a spreadsheet. For example, if you save £1000 per month (and uprate this with inflation) and you get a real return of 0% (i.e. your pension savings just keep up with inflation), then at 67 you would have £252k in today's money (21 contributions of £12k per year).

If the real rate was to be 2% over the next 20 odd years, then the end amount would be roughly £309k (again, in today's money).

If the real was to be 4%, then the final amount would be about £384k (again in today's money).

The question then becomes what investments might give you those rates of return? Historically, and broadly speaking, cash savings accounts have given a real return of about 1%, longer term government bonds about 2%, and shares about 5%. Holding a mix of these asset classes is usually held to be a sensible approach - there is some discussion as to whether it is beneficial to adjust the mix of asset classes as retirement is approached (usually by reducing the fraction allocation to shares and increasing the allocation to bonds and cash) or not.

The simplest approaches are then:

Retirement funds (also known as target dated and various other names) which will automatically change asset classes as retirement approaches (many platforms/fund houses offer these sorts of investments, e.g. Vanguard, Aegon, etc.).

Or 

Fund of funds (lifestyle, multi asset) have a constant asset allocation and it is up to the investor to change allocation as required. Again, these are widely available (e.g., HSBC, Vanguard, etc.)

InvesterJones

savememoneyplease said:

Hi guys

I am 46 and have just lost a chunk of money in a divorce. I have a basic pension but i've only put into it for a couple of years and now have no savings.

While I build my money back up, is it worth putting some into investments as well? Just something simple like Vanguard? Or is that something you should start in your 20s?

The best planning usually begins with understanding what the goals are so that you can take the appropriate risk to achieve them. Retirement saving is usually the main aim for investments, hence recommendations around pensions, but sometimes people 'just want more money' without a specific goal and therefore start making mistakes around chasing short term returns which leave them not as well off when it comes to the actual need that they didn't think about.

If it is retirement saving then, as mentioned, it's good news on a couple of fronts - there's probably tax incentives to save in a pension, and you've still enough time to consider volatile assets like equity funds, which historically have given better returns (no guarantees, mind) over the long term.