Investing in Shares
Yes, investing in shares is riskier than keeping money in a bank, but it can be more rewarding. Imagine saving £10,000 over 15 years to 2020. If invested in the UK stock market it would be worth £22,069, while the same cash held in a bank account would be worth £12,293. Is it time to invest in shares?
Why shares?
Low interest rates and high inflation destroys savings in the bank. In October 2022, inflation was 10.1% and the banks were offering up to 3% interest (easy access) or less! Sadly, interest rates have not kept up with inflation.
Beat inflation
Shares or equities can be bought by investors, who become shareholders. Shares have a reasonable chance of keeping pace with inflation if the companies can pass their rising input costs onto customers; good examples are energy, food, health, transport, and utilities.
Be prepared for ups and downs
Investing in shares has the potential to grow more over the long-term, and over time UK shares have done better than cash, government guilts or commercial property. However shares can either fall or rise in value because:
- They are doing better or worse than competitors, or there is a higher or lower demand for their products.
- Quality of the management to seek the best strategic direction for the business.
- Be able to control business costs and make a reasonable profit.
- The state of the UK or world economy, as this affects customers buying habits.
- Market sentiment is when investors lose confidence in shares and sell up or buy heavily into a rising stock market.
Investing isn't the same as putting your money in savings where your cash balance cannot fall. When investing in shares, expect over the long term to make more money than leaving cash in the bank. But as the value of the shares rises and falls, so does the value of the original cash investment. Buying shares is giving up the security of guaranteed returns (interest) from a bank account. It’s a case of horses for courses.
ChildMax continues to ensure your salary and pays your take home salary while you’re on 12 months’ unpaid leave, caring for a sick child. It starts from £49.50 or for easy budgeting an initial payment of £8.25 followed by 11 monthly payments of £3.75.
Visit at www.insurewithmax.com or call the UK call centre 0333 323 0098 for more information.
Important: You may not get back the amount that you invest in shares. If you have any doubts about making share investment decisions, then seek financial advice.
Sources:
https://www.investments.lloydsbank.com/boost-your-skills/new-to-investing/guide-to-shares
https://www.investopedia.com/articles/investing/080813/how-profit-inflation.asp
https://www.aviva.co.uk/investments/savings-ideas/how-does-inflation-affect-my-savings/
Date: 14 November 2022 by Max Robinson