Date Published: 13/05/2018 14:11
You have spent years accruing your wealth, building up a nice nest egg; so where should you keep it? Under the proverbial mattress? Or somewhere where it will grow?
Many people opt to keep their savings in a bank. It’s relatively safe and it will give you some sort of interest. But over time inflation can eat away at your cash and you may just be watching a shrinking pot. Michael Martin, at our friends Seven Investment Management, told the Financial Times that at the current average rate of inflation, a £100,000 lump sum could fall to £81,790 in just ten years.
With cash suffering from a steady decline, it may be better to look towards other avenues to diversify your savings and help them grow. Cash deposits might be tempting for security, and it is essential for satisfactory levels of emergency funds set aside, but a broad selection of different assets including equities are far more likely to produce higher returns.
In fact, since 1899, British stocks have returned 4.9 per cent a year in real terms, compared to 1.3 per cent for gilts and 0.7 per cent for cash, according to the most recent Equity Gilt Study released by Barclays. In the last decade, the figures are 5.8 per cent for stocks, 2.7 per cent for gilts and a very lacklustre -2.5 per cent for cash.
According to the study, taking any period of five consecutive years since 1899, the probability of shares beating cash was 76 per cent. Extend the holding period to a decade and the shares’ probability of doing better than cash rose to a very impressive 91 per cent.
But do remember that the value of investments can go down as well as up. Stocks and shares are valued from second to second, so their bid and offer value can fluctuate widely. It is essential to establish and continually review your attitude to risk and, ability for loss and ensure that your investments meet your circumstance at any given time.
No individual investment advice is given, nor intended to be given in this article and liability will be accepted in respect of any action you may take as a result of reading this article. If you are unsure you are urged to take independent investment advice.
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