Money that is not needed over the short term, usually a minimum of 5 years, forms part of your ‘money mother dough’. It’s your family’s life savings and we understand it’s important. Like a mother dough to create sourdough bread, your money mother dough needs the right process and conditions for growth. If looked after well, it will provide enough money to secure your family’s future and allow you to live your ideal life.

The six components of a successful money mother dough and to build your investments are outlined below.

Habitual saving

It doesn’t matter how much you earn, if you spend it all you’ll still have nothing left at the end of the month. All that hard work, and nothing to show for it.

Getting into the habit of paying yourself first each month, is essential to support you when you stop work. By starting regular saving habits sooner, and regularly increasing regular savings with each pay rise, your financial freedom can be accelerated. The fastest way to build your investments is to add more money to them.

Low cost

£1 saved in cost is the equivalent to £1 gained in returns. When investing, higher cost is not always better. In fact, low cost is evidenced to be a predictor of higher investment returns.

You should look to find a fair return for the amount of risk you are prepared to take. Tip – don’t fund a stockbroker’s gourmet lunch!

High diversification

Investment markets are broadly efficient. That means the price of assets reflects all available information to the market and is the average of what all investors think. For every buyer, someone is selling the other side of the trade. Academic evidence shows it is very difficult to consistently outperform the market.

The best way to reduce ‘stock specific’ risk (think what happened to Northern Rock, Blockbuster and Topshop’) is to diversify your holdings over a large number of assets.

Tax efficient

There are a number of tax ‘wrappers’ you can save money into. Within these tax wrappers you can hold investments. Choosing the right tax wrapper for your savings is essential to build your money mother dough.

A pension is a type of tax wrapper, and no, they are NOT boring. Often misunderstood, using a pension effectively whilst considering your personal circumstances, is an essential ingredient of a good money mother dough. Whilst extremely tax efficient you cannot access a pension until you are 55, which will increase to 57 from 2028. If you require access to you funds, then consider other tax efficient wrappers.

ISAs don’t have to be the cash version taken out from a bank; a stocks and shares ISA could be more suitable to meet your objectives. Note – deposits are more secure than stocks and shares.

In addition to the tax wrapper decisions, your available savings allowances and tax exemptions are ever changing and maximising them each year can be a work of mathematical art.

Balance risk and reward

Understanding risk and reward is essential to implementing an effective investment strategy in your money mother dough.

Your risk profile is made up of 6 factors, we call KENCAT (it’s an acronym). Knowledge, Experience, Need, Capacity, Attitude, Timeframe.

After assessing these factors, you can judge the amount of investment risk you can take with your investment strategy. The risk profile will determine the proportion of assets held as ‘growth’ assets (equities, property etc.) and the proportion of defensive assets (cash, bonds etc.). Investors with a higher risk profile will likely have a higher allocation to growth assets.


It’s easy to get caught in the moment when investing and be dragged into checking your investment valuations daily. It can hurt when we see the value of our investments declining. As humans, we are conditioned to act when things hurt. Touch a hot plate, pull away. Hear a bang, run for the hills.

The best friend of an investor is time. Time in the market and not timing the market is proven to be a successful strategy over long periods and this requires patience. Patience to ride out the bad times, tolerate the daily market fluctuations and benefit from capitalism doing its work.

The average investor sells at the bottom and buys at the top.

Additional notes

Remember that when investing your capital is at risk. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

This article was written by Gregory Deer at Muvado Money Limited, an appointed representative of Sense Network Limited, based on his understanding of current legislation. Dated 17th May 2023.