If you’ve got £100 spare you can put it in the bank (or in a shoe box under your bed) but it will lose money to inflation. This is just a fancy way of saying that £100 won’t buy as much stuff next year (because next year prices will inevitably be higher).
So what’s the alternative.
Invest it. In the stock market. For the long term.
On any given day, the stock market represents the collective feelings of all investors. And it can be a wild ride day to day.
But over the longer term, these short term fluctuations in emotions get flattened out. And what you’re left with is the result of collective rationality.
The stock market is not like gravity or even the weather. It doesn't follow set laws. But it does have some pretty good rules of thumb.
The basic facts have remained the same. Over time (think 10, 15, or 20 years), stocks typically do better than bonds, and bonds typically do better than cash. Low expenses are typically a good sign of future relative performance. We also know that a diversified portfolio will help protect you from the variability of the stock market. Typically.
Rich investors know this. Now you know this too. Use it to your advantage.
You don’t have to be rich to invest but you do have to invest to be rich.