By this point in the year, most people have broken their New Year’s resolutions.
If you had intended on going to the gym more, but haven’t managed to make it happen, you are not alone. According to studies, approximately 80% of New Year’s resolutions fail.
Strava analysed its data and worked out that ‘quitters day’ this year was 12 January. If you set yourself a resolution to join the gym, and kept it, then congratulations! If not, take heart in know there is a silver lining.
By quitting the gym, you can do home-workouts and save yourself some money to invest.
The average cost of gym membership in the UK is £40 a month, according to the Money Advice Service, although that varies drastically.
Read on to find out how I think that £40 a month might get you rich.
Little by little
£40 is not a lot of money. But given consistency and time, it will add up.
With a regular monthly sum like this, I think it would be worth opening a Stocks and Shares ISA. Any investment made in an ISA wrapper is not subject to tax. This tax-free status is currently limited to £20,000.
At this point, you may be wondering why I think a Stocks and Shares ISA trumps what is traditionally seen as the safer alternative: the Cash ISA.
This is simply because interest rates are at historic lows. Although the stock market can be risky, I think a Cash ISA is more dangerous for the longer-term investor. This is because the returns on your investment probably will not match the real rate of inflation. To put it another way, £1 today possibly will not match £1 in 20 years.
Keeping pace
A Stocks and Shares ISA can allow you to make modest regular investments. For example, with Hargreaves Lansdown, customers can invest as little as £25 into a fund each month.
With £40 a month then, you will probably only be able to invest in one fund. You will want to make sure that your holdings are diversified enough, while maximising returns. You will also want to ensure you are not paying over the top for fees.
The best bet might be to invest in an FTSE 250 index fund. This index sits below the FTSE 100 and contains the UK’s next 250 largest listed companies. A fund tracking the FTSE 250 provides an investor with an instantly diversified portfolio.
I believe its smaller size may enable it to outgrow its larger sibling. After all, elephants cannot gallop.
As Harvey Jones notes, this is exemplified by recent returns: over five years, the FTSE 100 has grown 32.3%, whereas the FTSE 250 has grown 48.9%.
Another benefit of index fund investing is the low fees charged, which are often below 0.2%.
Over time, your £40 a month can add up. Hopefully, you can put your feet up and watch your money grow.
