Learn the Basics
Understanding the fundamentals of investing
Educational Purpose: This section introduces the fundamentals of investing: what it is, why it matters, and how to begin. It is intended for educational purposes only and does not constitute financial advice.
Quick Navigation
1. What Is Investing
Understanding the foundation of wealth building
Investing means putting your money into assets that have the potential to grow in value over time. These assets may include company shares (stocks), government or corporate loans (bonds), property, or diversified funds. The goal is to build wealth and outpace inflation.
Key Difference: Unlike saving, which preserves money, investing aims to grow it. Savings accounts keep your money safe but offer minimal returns. Investments carry more risk but offer the potential for significantly higher returns over time.
2. Why Investing Matters
Protecting your wealth from inflation
Inflation gradually reduces the purchasing power of money. For example, £10,000 today may only be worth approximately £7,400 in ten years if inflation averages 3% annually. Traditional savings accounts often offer returns below inflation, meaning your money may lose value in real terms.
The Inflation Problem
Investing offers the potential to grow your capital faster than inflation, helping to preserve and increase its value over time. This is why long-term wealth building requires investing, not just saving.
Visual Suggestion: A line chart showing "Cash vs Stocks over 20 years (adjusted for inflation)" would demonstrate how invested money significantly outpaces cash savings over time.
3. Long-Term vs Short-Term Investing
Understanding different investment approaches
❌ Short-Term Trading
- •Focuses on rapid buying and selling
- •Pursues quick profits
- •High-risk and emotionally driven
- •Often leads to inconsistent results
- •Requires constant monitoring
✅ Long-Term Investing
- •Emphasizes steady growth
- •Benefits from compound returns
- •Reduced risk through time
- •Disciplined and sustainable
- •Minimal time commitment
STP Finance Approach: We advocate for long-term investing as a disciplined and sustainable approach to building wealth. Time in the market beats timing the market.
Visual Suggestion: A bar chart showing "Volatility and returns: Trading vs Investing" would illustrate how long-term investing provides more consistent returns with less volatility.
4. The Power of Starting Early
Why time is your greatest asset
Compound growth occurs when your investment returns begin to generate their own returns. The earlier you start, the more time your money has to benefit from this exponential effect.
Real Example: £250/month for 10 years
At 10% average annual return (S&P 500 historical average)
⚠️ The Cost of Waiting
Delaying the start by just 5 years could reduce the outcome by more than £20,000. Time is the most powerful factor in wealth building—you can't get it back once it's gone.
Try It Yourself: Compound Growth Calculator
Use this calculator to see how your money could grow over time. Adjust the monthly amount, years, or return rate to explore different scenarios.
Compound Interest Calculator
See how your investments can grow exponentially over time
Results shown with default values. Change any input below and click Calculate to see your personalized results.
Compound Interest means your money earns returns, then those returns earn returns, creating exponential growth over time.
Optional: Add regular monthly investments
S&P 500 historical average: ~10%
Enter your details and click Calculate
See how your wealth can grow over time
S&P 500 Historical Average Returns
Historical data shows: The S&P 500 has averaged ~10% annual returns over the long term. Past performance doesn't guarantee future results, but demonstrates the power of long-term investing.
5. How Much Do You Need to Start
You can start with less than you think
That's all you need to start investing
Many modern platforms support fractional investing, allowing you to buy portions of assets. You don't need thousands to begin your investment journey.
Could grow to £10,300 in 10 years
Could grow to £20,600 in 10 years
Could grow to £51,650 in 10 years
The key is consistency and a long-term mindset. Even modest monthly contributions can grow significantly over time thanks to compound growth. Start with what you can afford, and increase contributions as your income grows.
💡 Call to Action
Ready to start your investment journey? Explore platforms that allow you to begin with as little as £1.
Explore Investment Platforms →6. Types of Investments
Understanding your investment options
Each investment type serves a different purpose and carries its own risk and return profile. Many investors choose to diversify across several types to balance risk and potential returns.
| Investment Type | Description | Risk Level | Time Horizon |
|---|---|---|---|
| Stocks | Ownership in companies | High | Long-term |
| Bonds | Lending to governments or corporations | Medium | Mid-term |
| ETFs | Diversified bundles of assets | Medium | Long-term |
| Property | Physical real estate investments | Medium | Long-term |
| Cash | Low-risk, but loses value over time | Low | Short-term |
Visual Suggestion: A scatter plot showing "Risk vs Return vs Time Horizon" would help visualize how different investment types compare across these three dimensions.
📚 Learn More About Investment Types
Want to dive deeper into each investment type? Explore our detailed guides on stocks, bonds, ETFs, and more.
Explore Investment Types →7. What Makes Investing Work
The key principles of successful investing
Time and Patience
Long-term investing allows you to ride out market volatility and benefit from compound growth. The longer you stay invested, the more time your money has to grow.
Reinvesting Gains
Compound growth happens when you reinvest your returns. Your gains generate their own gains, creating exponential growth over time.
Avoiding Emotional Decisions
Successful investors stay disciplined during market ups and downs. Panic selling during downturns locks in losses and prevents recovery.
Tax-Efficient Accounts
Using ISAs and pensions helps you keep more of your returns by minimizing tax. These accounts are essential tools for UK investors.
💡 Call to Action
Learn about UK accounts that help you invest tax-free and maximize your returns.
Explore ISAs & Tax Benefits →Important Legal Disclaimer
Educational Content Only: All information provided on this website is for educational and informational purposes only. It does not constitute financial, investment, tax, or legal advice.
Not Financial Advisers: STP Finance and its content creators are not FCA-regulated financial advisers. We do not provide personalized investment recommendations or advice tailored to your individual circumstances.
Investment Risk Warning: All investments carry risk. The value of investments can go down as well as up, and you may lose some or all of your invested capital. You should never invest money you cannot afford to lose.
Past Performance Disclaimer: Past performance is not indicative of future results. Historical data, charts, and returns (including S&P 500, NASDAQ-100, FTSE 100, and FTSE All-World) are provided for educational purposes only and do not guarantee future performance.
Do Your Own Research: Before making any investment decisions, you should conduct your own research, consider your financial situation, investment objectives, and risk tolerance, and consult with a qualified, FCA-regulated financial adviser.
No Liability: We accept no liability for any losses or damages arising from the use of information on this website. Investment decisions are your sole responsibility.
By using this website, you acknowledge that you have read, understood, and agree to this disclaimer. If you do not agree, please do not use this website.