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The theory

Time is one of the most important factors in investing. The longer you invest for, the more opportunity there is to benefit from the stock market’s long-term growth potential. Of course, there are no guarantees, but starting earlier - rather than later - can make your money work harder over time.

How it works in practice

This example is for illustrative purposes only. In reality, investment values can fall as well as rise rather than give a steady return. Charges would also apply and reduce any returns.

Petra starts investing £1,000 a year at 25 years old, while Jonathan invests the same amount from the age of 35. By the time they both reach 65, not only does Petra have significantly more money, she also stopped paying in at the age of 55. This is the power that starting investing early versus late can have. 

The theory

If you find - for whatever reason - that you have a little more money to invest, any extra contributions could make a big impact on your future savings.

How it works in practice

This example is for illustrative purposes only. In reality, investment values can fall as well as rise rather than give a steady return. Charges would also apply and reduce any returns.

Nakhalar and Joe pay 10% of their £30,000 a year salaries into a pension at the age of 25. They both receive 3% salary increases each year. Nakhalar pockets each pay rise. While Joe ups his contributions by two percentage points every five years - so it goes from 10% to 12%, then 14% and so on. By the time 25 years have passed Joe's now paying 20% of his salary into his pension. This makes a £265,573 difference to his eventual pot.

Important information - Investment values (and income from investments) can go down as well as up, so you may get back less than you invest.

The theory

Markets rise and fall. It's a natural part of investing. History shows that the longer you're invested, the lower the chances that you'll make a loss, although this isn't guaranteed. Invest for just a year and the range of outcomes you might get is potentially very wide. The longer you stay invested, the narrower this range becomes. And the more likely it is that you'll make a positive annualised return (which basically means the average yearly return on your investments once you've sold them).

How it works in practice 

This example is based on the S&P500. Past performance is not a reliable indicator of future returns.

If Sarah invests in shares for one year, she could expect - based on history - an annualised return which ranges from around minus 43% to plus 60%. However, if she invests for five years her likely annualised return narrows to between minus 7% and plus 29%. Stay invested for 20 years and the data show that Sarah's annualised return would range from just under 5% to plus 18%. In other words - the longer she's invested, the more confident Sarah can be that her return will be positive.