It’s not when, but rather for how long you invest which will determine how effectively your money grows.

By maintaining a long-term view of your investments, you can reduce the impact of short-term market fluctuations and, over time, enjoy higher growth.

For example, if you were to invest $200 each month at five per cent interest, your total interest at the end of one year would be $2,466, less tax and management fees. However, this figure would increase to $13,658 after five years and $31,186 after 10 years.

As you can see, there’s a lot to be gained by giving your investments time to grow.

A long-term investment strategy has the added advantage of compounding the interest you earn on your investment.

Compounding

Compounding is when you reinvest the interest you earn on an investment. Over time, this can be an effective means of accelerating the growth of your money.

Say, for example, that your six months’ fixed interest bank account has earned $25 in interest. After tax, you could either spend the interest or reinvest it with your original lump sum for a further six months.

If you continue to reinvest your interest over a few years, you’ll be earning interest on your interest on your interest…

This “snowballing” principle works with a variety of investments. For further information see our section on Budgeting and Savings advice.