We are just starting to see the first signs of interest rates rising after 10 years of painfully low rates. Whilst low interest rates are great for our clients with mortgages, for our clients with savings the low interest rates over such a long period of time could be described as a disaster. For savers we are hoping to see another rise in interest rates later in the year, but even if this does happen it is unlikely that interest rates will be over 1% by the end of this year.
But low interest rates alone are not the full story. This is inflation. The buying power of money held on deposit is falling – so savers could actually be losing money. This year, inflation has been approaching 3% but it’s almost impossible to find a savings account that will pay interest anything like as high as 3%.
We all need to keep money in banks and building societies to draw on for emergencies and unexpected every day expenses, but the combination of low interest rates and inflation means that the real value of our savings is even lower.
There is something you can do, you could consider looking into investing your money in ways other than bank and building society accounts. If you are prepared to take an element of risk with your longer-term savings, and by this we mean money you don’t envisage spending for the next five years or so, and by risk we understand that many clients want their money invested in a relatively cautious way; you could look at Investment Funds.
The value of more balanced investment funds can still fall as well as rise, but over the longer term they can provide investors with a return that beats inflation and sometimes this can be by a significant amount. For example of the 146 funds in one of the most popular types of balanced investments*, 113 funds have been running for more than 5 years and over the last 5 years all have made money for their investors. The best fund has grown by 59.3% over the five years and the worst fund has grown by 10.3%, still noticeably better than interest rates. Although investor charges will reduce the growth enjoyed.
The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.
It is the role of our local Financial Advisers to make sure our client’s money is held in the right place, for the right reasons and for the right amount of time. What is right for you is entirely dependent upon your individual circumstances and your personal lifetime goals.
At Four Oaks Financial Services, our initial consultation is at our cost. Our Financial Advisers in Lichfield will be delighted to discuss your savings and investments and lifetime financial plan in detail with you. Contact our Client Liaison Team on 01543 401029 for more information or to make an appointment.
*Source: Trustnet 6.6.18 – IA Mixed Investment 20-60% Shares sector
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