Many people save with a building society or a bank deposit account. However, this only provides a small amount of interest and no capital growth. Investing in the stock market over the long term has outstripped the returns provided by a bank or a building society* and may therefore provide a better route to meeting your investment objectives. Please remember that past performance is not a guide to future performance, prices may go down as well as up. Also, in a bank or building society your capital is secure, unlike an investment in the stock market where you may not get back the amount you originally invested.
When you buy equities or shares you are actually buying a part of the company. All companies are subject to market forces, such as competition, and their share prices can grow or decline. As your share makes you a part owner in the company, your investment will grow or decline accordingly in line with the share price of the company. An equity investment is therefore less secure than a bank or building society investment but it offers the prospect of higher long term returns.
When you invest in an M&G fund, you are investing in all the companies that are held within that fund. The risk of investing in the stock market is therefore reduced by spreading your investment over a number of companies, rather than being tied to just one company.
* Source: Morningstar, Inc., gross income reinvested over 25 years to 31.03.08