FTSE 100 has reached record high. Is now the time to start investing? & more related News Here

As the new year got underway, so did the UK’s major stock indexes.

The FTSE 100 climbed above 10,000 points for the first time since its inception in 1984, delighting investors – and the Chancellor, who wants more of us to move money out of cash savings and into investments.

The index tracks the performance of the 100 largest companies listed on the London Stock Exchange and is expected to grow by more than a fifth in 2025.

But with many still struggling with everyday costs, and with talk of some shares being overvalued, is the FTSE’s success really a good time to encourage first-time investors?

People can invest their money in many different ways and in different things. Various apps and platforms have made it easy to do.

Importantly, the value of investments can go up and down. Invest £100 and there is no guarantee that the investment will still be worth £100 after a month, a year or 10 years.

But, in general, long-term investments can be attractive. The rise of the FTSE 100 is proof of this. Shareholders may also receive dividends, which they can take as income or reinvest.

For years it has been advised that investing should be taken as a long-term strategy. Give it time, and your money will grow into something much bigger than a savings account.

In contrast, cash savings are much more stable and secure. The amount of interest varies between account providers, but savers know what the returns will be. Savings rates have been quite good over the last year, but it is generally believed that interest rates are going down.

Savings accounts are popular when setting aside money for emergencies, or a vacation, a wedding, or a car – for one major reason: You can usually withdraw the money quickly and easily.

“It’s important that everyone has savings. It gives you access when you need it,” says Anna Bowes, savings expert at financial adviser The Private Office (TPO).

“This means you don’t have to cash out your investments at the wrong time.”

Investing advocates agree that saving is an important part of the mix for everyone looking to manage their money.

“Startups should have a cash buffer in case of an emergency before they start investing,” says Gemma Arnold, voluntary non-executive director of the UK Individual Shareholders Society (Sharesoc).

According to the regulator, the Financial Conduct Authority (FCA), one in 10 people have no cash savings, and another 21% have less than £1,000 to withdraw in an emergency.

But Arnold and others say cash is not without risks. As time passes, the spending power of savings decreases due to rising costs of living, until the interest rate on the savings account beats inflation.

Our brain makes decisions about risk and reward thousands of times every day. We weigh the risk of crossing the road against the reward of crossing to the other side, and so on.

In terms of money, people who are more risk averse tend to stick to savings, while others go into investments. It also helps if you have money you can afford to lose.

It is worth remembering that millions of people already have money invested for their pension, although it is often managed for them and they do not pay much attention to it.

The FCA says the seven million adults in the UK with £10,000 or more in cash savings could achieve better returns through investing.

Chancellor Rachel Reeves has advocated greater risk appetite from consumers. She says the benefits of long-term investment are clear, both for those who have the money and for the UK economy as a whole.

She is changing the rules on tax-free Isas (individual savings accounts) in a much-discussed move aimed at encouraging investment.

That’s why, in a few months, we’re all going to be hit with an advertising campaign (funded by the investment industry) asking us to give some thought to investing.

It would be a modern version of the Tell Sid campaign of the 1980s, which encouraged people to invest in the newly privatized British Gas.

But is this the right time for such a campaign? At that time, many people invested in British Gas for relatively quick profits.

Invest now, and chances are there may be a short-term impact on the value of your investment.

Many commentators have suggested that the AI ​​technology bubble is about to burst. In other words, they say it’s likely that the value of companies that have invested heavily in AI is overinflated and will decline – meaning anyone investing in those companies will see the value of those investments decline as well.

These are not just commentators. The Bank of England has warned of a “sharp correction” in the value of major tech companies. America’s top banker Jamie Dimon, chief executive of US bank JP Morgan, said he was concerned, and Google boss Sundar Pichai told the BBC that there was “irrationality” in the current AI boom.

The truth is that no one knows when or if this will happen.

All this may have people eager for some help, and the regulator has come up with a plan to allow banks to offer some assistance.

Financial advice can be expensive at present, and regulated advisers can’t afford someone who doesn’t have thousands of pounds to invest.

Financial influencers have tried to fill this void on social media. Some have been accused of promoting financial schemes and risky trading strategies with glowing promises of get-rich-quick in front of fancy cars – but without authorization or explanation of the risks involved.

Some first-time investors have turned to AI for tips. Some people are susceptible to scammers who offer investment opportunities that seem too good to be true.

According to a survey by the FCA, almost one in five people turned to family, friends or social media for help in making financial decisions.

Therefore, from April, registered banks and other financial firms will be allowed to offer targeted assistance, preferably for free. This will lead to a lack of individually tailored advice, which can only be provided by an authorized financial advisor for a fee. But it will allow them to make investment and pension recommendations to clients based on what similar groups of people are likely to do with their money.

This is a major change in funding guidance, but like investing, there is no guarantee that it will be successful.