Forget Black Friday. Here’s how investing your cash could make you rich!

The biggest event in the retail calendar is almost upon us. Paul Summers explains how choosing not to take part can make you richer.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Gearing up for a big spend over the retail extravaganza that’s Black Friday/Cyber Monday later this month? You’re not alone.

Last year, a survey by global management consultancy Oliver Wyman found that shoppers in the UK spend more over this period than anywhere else in the world (£327) — yes, even more than in the US from where the ‘tradition’ originated (£302).

And while the uncertain political and economic outlook may convince some to reign in their buying this year, there’s plenty more of us who will use it as an excuse to cheer ourselves up and/or get the Christmas shopping done and dusted, especially when faced with a barrage of cheap deals on electricals, clothes, homewares and, well, pretty much everything.

Now, don’t get me wrong. Black Friday can be a great way of bagging a deal, especially if you’ve been eyeing up items for a while and can afford to pay for them without accumulating debt. 

Today however, I’m going to show you how avoiding the annual sales binge (which begins on 29 November) and investing this money instead could turbocharge your wealth over the long term. 

Why you should empty your basket

Let’s keep things simple to begin with and say you choose invest that £327 mentioned earlier in a cheap fund that tracks stocks from all around the world.

Let’s also assume the average annual return on stocks is 7% (inclusive of any dividends), that this money will stay invested for the next 20 years, and you make no further contributions over this time.

According to my calculations, this would give you £1,265 by 2039. Whether that’s worth exchanging the pleasure you’ll get from what you’ll buy on Black Friday is up to you. But look at what happens when you increase the length of time you invest for. Stashing away the same amount for 30 rather than 20 years gives you just under £2,500.

Still not impressed? OK, what if you invested the same £327 every year for the next 30 years (split into 12 monthly contributions of £27.25)? At the same rate of return, this would leave you with almost £31,000.

Now, let’s make things extra interesting. Let’s suppose you had a high risk tolerance and chose to invest your cash in a similar passive fund that tracks smaller stocks (which research shows have a tendency to collectively generate bigger returns than market giants). Although nothing is guaranteed when it comes to investing, what if you now achieve an average return of 10% per annum? After 30 years, you’d have just under £54,000!

Remember, all this money has been accumulated just by choosing not to spend the average amount on Black Friday/Cyber Monday. Think about how much more you could accrue if you were able to add to your monthly savings.

As a guide, doubling that £27.25 to £54.50 and investing every month for 30 years at a 10% annual return will bring you close to £108,000. So long as you house your investments inside a Stocks and Shares ISA or Self Invested Personal Pension (SIPP), you’ll also retain most of this amount since you won’t pay a penny in capital gains or income tax (although bear in mind that tax rules can change!). 

Black Friday can be a great way of getting things for less but the opportunity costs of splurging your cash are jaw-dropping. Keep this in mind before proceeding to the checkout.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Close-up of British bank notes
Investing Articles

£8 per year in extra income for life, for each £100 invested today? Here’s how!

Christopher Ruane explains how he would aim to set up extra income streams for the rest of his life by…

Read more »

Photo of a man going through financial problems
Investing Articles

With a £20K Stocks and Shares ISA, I’d target £1,964 in annual dividends like this

With an annual passive income target close to £2,000, our writer explains how he'd put a £20K Stocks and Shares…

Read more »

Illustration of flames over a black background
Investing Articles

Down 63% in 2024, what’s going on with the Avacta (AVCT) share price?

2024 has been a difficult year for many companies in the biotechnology sector, with the AVCT share price down heavily.…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Here’s how I’d invest £800 the Warren Buffett way!

Christopher Ruane learns some lessons from super-investor Warren Buffett he hopes could improve his own stock market performance.

Read more »

British Isles on nautical map
Investing Articles

Michael Burry just bought 175,000 shares in this FTSE 100 company

Scion Asset Management announced a $6.5bn stake in BP this week. But what could Michael Burry be seeing in an…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

£5,000 in savings? Here’s how I’d aim to start making powerful passive income today

With a cash lump sum to invest, this Fool lays out how he'd start making passive income. He also details…

Read more »

Investing Articles

Just released: our 3 top small-cap stocks to consider buying before June [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

My best FTSE 250 stock to consider buying now for passive income while it’s near 168p

This is a rare stock with a growing underlying business and a fat dividend yield – it’s worth consideration for…

Read more »