Money | Investments

Saving

In a recent survey the average family was said to have just over £3,000 in savings; not really enough to get into serious investing. You do have to start somewhere though. It is important to understand the nature of money and the way it is devalued by a constantly increasing money supply. The Bank of England keeps issuing the stuff and our money gets devalued by inflation. In real terms if you have £3,000 in savings, you need a return of 5% or £150 just to stand still and not lose money.  This is virtually impossible because you want instant access to your money; in case of emergencies. Most instant access accounts offer pathetic interest and the rate often includes a ‘bonus’ for the first 12 months. You then have the hassle of moving it from one account to another, if not one bank to another.

You can put £1,000 into an instant access account in case of emergencies and then ‘invest’ the rest. I like Zopa and would put the rest into lending to the low risk markets probably the A* and A market. If interest rates don’t go up soon, gold also seems a good investment. It is over $1,500 an ounce but could go beyond $2,000 an ounce. There are a lot of people who disagree and call gold investors ‘gold bugs’. We have done well out of it so far though! I wouldn’t continue to invest in gold once interest rates go higher than inflation; assuming that ever happens.

You can invest in your own expertise, if you happen to be an expert in something like collectables or antiques. If you go around buying collectables in you spare time using your savings and then selling at a profit; that can be an excellent investment. The same applies to anything else you happen to be an expert on.

Bonds, certificates and shares.

Corporate bonds can be bought through a stock broker and usually through your bank; they are basically loans to companies and relatively low risk but pay less than Zopa for comparable risk. National savings and Investments certificates will pay inflation plus 0.5% and these give you a return in real terms; not a good one but these days you are lucky to give a return at all. The Post Office do a similar certificate but that one isn’t tax free. If you pay tax, definitely look at NSandI. Shares are risky now and you really need well over £3,000 to consider them. You can research shares on the internet and search engines make it easier. Check out government contracts and you find the government is cutting some things and spending more on others. The cuts affect housing and social welfare and the increases tend to be in IT and outsourcing. Investing in companies that supply the government in a growth area seems to make sense. Some investments are fashionable like social media. There may be a frenzy of investment in social media companies like LinkedIn and people can’t wait for a Facebook IPO; but these shares are already overpriced. It may be a better idea to invest in something unfashionable and some people are considering loss making banks.

It’s all risky

If you decide to put your money in the bank and wait for it to be devalued then you have a safe ‘investment’; but otherwise you have to take a risk. The greater the risk, the higher the return, but all investments have a risk. You have to try to predict what will happen to the economy, if it comes out of recession then some company shares may be a bargain now. If it double dips into another recession then I would expect gold to appreciate. You pays your money and takes your choice!

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