The FTSE 100 has reached a record high. Is now the time to start investing?

As the new year progressed, so did the index of the UK’s leading shares.

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

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

But with many people still struggling with everyday costs and some stocks being overvalued, does the success of the FTSE really make it the right time to encourage new investors?

People can invest their money in different ways and in different things. Various apps and platforms have made this task easier.

Importantly, the value of investments may increase and decrease. 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 lucrative. The rise in the FTSE 100 is proof of this. Shareholders can also receive dividends, which they can take as income or reinvest.

For years, it has been advised to view investments as a long-term strategy. Give it time and your pot will grow much more than if it were in a savings account.

On the other hand, 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 held up fairly well over the past year, but interest rates are widely believed to be falling.

Savings accounts are popular for putting money aside for an emergency, or for a vacation, a wedding, or a car – for one predominant reason: you can usually withdraw the money quickly and easily.

“It’s important for everyone to have savings. This gives you access when you need it,” says Anna Bowes, savings expert at financial advisers The Private Office (TPO).

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

Investment evangelists agree that saving is an important part of the mix for anyone managing their money.

“People just starting out should have a cash reserve in case of emergency before diving into investing,” says Jema Arnold, volunteer non-executive director of the UK Individual Shareholders Society (ShareSoc).

One in ten people have no cash savings and 21% have less than £1,000 to draw on in an emergency, according to regulator the Financial Conduct Authority (FCA).

But Arnold and others point out that cash isn’t risk-free either. Over time, the purchasing power of savings is eroded by the rising cost of living, unless the interest rate on savings accounts exceeds inflation.

Our brains judge risk and reward thousands of times every day. We consider the risk of crossing the road versus the reward of getting to the other side, etc.

With money, those who are more risk averse tend to stick to savings, while others lean toward investments. It also helps if you have money that you can afford to lose.

It’s worth remembering that millions of people have already invested money for their retirement, even though that money is often managed for them and they don’t pay much attention to it.

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

Chancellor Rachel Reeves has called for greater risk-taking by consumers. For those with money, she says the benefit of investing long-term for them and the UK economy as a whole is clear.

It changes the rules on tax-free Isas (individual savings accounts) in a highly controversial move to encourage investment.

This is also why, in a few months, we will all be bombarded by an advertising campaign (funded by the investment industry) inviting us to think about investing.

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

But is now the right time for such a campaign? At the time, many people were investing in British Gas for a relatively quick profit.

Invest now, and the value of your investment may suffer in the short term.

Many commentators have suggested that an AI technology bubble is about to burst. In other words, they’re saying it’s possible that the value of companies heavily focused on AI has been overinflated and is plunging — meaning that anyone who invests in these companies will see the value of those investments fall as well.

It’s not just the commentators. The Bank of England has warned of a “sharp correction” in the value of big tech companies. America’s top banker Jamie Dimon, chief executive of US bank JP Morgan, expressed concern, and Google boss Sundar Pichai told the BBC that the current AI boom was “irrational”.

In truth, no one really knows if and when this will happen.

All of this could lead to people needing help, and the regulator has drawn up plans to allow banks to offer some assistance.

Currently, financial advice can be expensive, and regulated advisers may not care for anyone who doesn’t have tens of thousands of pounds to invest.

Financial influencers have tried to fill the void on social media. Some have been accused of promoting financial schemes and risky business strategies with glitzy promises of getting rich quick in front of luxury cars – but without authorization or any explanation of the risks involved.

Some new investors have turned to AI for guidance. Some are vulnerable to fraudsters who offer investment opportunities that sound too good to be true.

Nearly one in five people have turned to family, friends or social media to help them make financial decisions, according to an FCA survey.

So, from April, registered banks and other financial companies will be allowed to offer targeted support, preferably free of charge. It does not offer personalized advice, which can only be provided by a licensed financial advisor, for a fee. But it will allow them to make investment and retirement recommendations to clients based on what similar groups of people might do with their money.

This is a big change in financial focus but, as with investments, there is no guarantee that it will be successful.