Investing a regular £100 a month can build a six-figure pot over time, according to fund industry figures who set out fund choices for savers at different life stages.
At an 8 per cent rate of interest, £100 invested monthly would grow to £18,417 after ten years and £150,030 after 30 years, of which only £36,000 would come from the saver's own contributions. Returns are free of tax if the money is invested through a stocks and shares Isa, which can be opened on an investment platform that allows automatic monthly payments.
For savers wanting a simple starting point, Vanguard's LifeStrategy range of funds charges 0.2 per cent a year and holds a mix of shares and bonds in varying proportions depending on risk appetite. BlackRock offers a similar range called MyMap, which costs 0.17 per cent. Another option is a global index fund such as the Fidelity Index World Fund, which costs 0.12 per cent and tracks the performance of world stock markets.
Building a core and satellite portfolio
Savers can use one of these funds as a foundation and add more specialist funds around it, an approach known as core and satellite investing. Under this method, most of a £100 monthly payment goes into the core holding, with smaller amounts split across satellite funds.
Fund picks for young starters
Juliet Schooling Latter, research director at FundCalibre, said investors in their 20s benefit most from starting early because their money has longer to grow through compound interest. She said younger investors can afford more risk and should look at parts of the market that are volatile in the short term but offer the greatest growth over decades.
She recommended emerging and frontier markets funds, including Artemis SmartGARP Global Emerging Markets Equity and T. Rowe Price Frontier Markets Equity. Emerging market funds invest in countries such as China, India and Brazil, while frontier market funds invest in countries including Nigeria, Peru and Bangladesh.
Rob Morgan, at Charles Stanley Direct, pointed to BlackRock Global Unconstrained Equity, which focuses on finding quality growth businesses and has returned 48.9 per cent over three years. Its top holdings include ASML, which makes computer chip manufacturing equipment, along with Amazon and Google parent company Alphabet.
Options for middle-aged savers
Morgan said an easy route into investing in middle age is a global tracker fund, which offers immediate diversification but in practice is heavily weighted toward US and technology companies, since those sectors contain many of the world's largest firms.
For a steadier option less reliant on the US and tech sector, Morgan pointed to the JOHCM Global Opportunities Fund, which offers a balanced portfolio focused on durable businesses with strong balance sheets and consistent cash generation. Its top holdings include US energy network firm Sempra and German stock exchange operator Deutsche Boerse, and it has returned 38.1 per cent over three years.
Schooling Latter suggested BNY Mellon Multi-Asset Balanced, which is up 40.1 per cent over three years and holds stocks including US mining firm Applied Minerals, Alphabet and Taiwan Semiconductor.
Funds for those eyeing retirement
Many older investors shift from growing their investments to preserving their value, which calls for a more cautious approach. Morgan said the Troy Trojan fund takes a flexible approach to preserving the real value of wealth against inflation. The fund has returned 22.8 per cent over three years and holds Invesco Gold ETC, which tracks the price of gold, along with Visa and Alphabet.
Ian Aylward, at AJ Bell, said a bond fund might suit investors close to or in the early years of retirement, and suggested the M&G Global Corporate Bond fund may be worth considering.
