Why invest?

If you have a pot of money that you don't need right now, you can either keep the money held as cash in a bank account or invest the money (e.g. in a Wealthsimple portfolio) to try and maximise the value of this pot for when you do require the money!

Here at Wealthsimple, we recommend that you hold anything that you may need for the next 3 years as cash.

We also think it's best practice to keep at least 3 - 6 month's worth of wages held as emergency cash to help pay for any unexpected costs that may arise such as the boiler breaking!

For any cash that you do not need for at least three years, we recommend investing! Why?

By investing in a Wealthsimple portfolio you have the potential to achieve a higher return on your investments than you otherwise would if your assets were held as cash. Whilst a Wealthsimple portfolio can go up and down in value and is therefore generally considered as being riskier than holding assets as cash in a savings account, from looking through the history of financial markets, investing in a suitable portfolio for at least three years will usually ride out any short term dips in the market to provide you with investment growth!

What's also important to consider is that cash, in general, will actually fall in value over time due to a concept known as ‘inflation'. This is the concept that the cost of buying goods and services is constantly increasing - in fact, the UK government targets inflation at 2% per year. In effect, this means that £100 today will be worth less in a year’s time than it is now. So by just keeping your money held as cash, you are losing money! Therefore, over the longer term (i.e. at least three years), we think it's a great idea to try and achieve investment growth above inflation by investing in a Wealthsimple portfolio.