Long Term Returns on Investments

There is a belief amongst many people that cash is safe and shares are risky causing them to shun the stock market and choose to keep their money in the bank.

If you had put £1 in a savings account in 1899 it would be worth £3 today in ‘real’ terms i.e. after allowing for inflation. A £1 investment in the UK stock market would have grown to £348.

If you put money in a savings account its value at maturity is set in advance. If, over a period, turns out to be high, the predetermined amount will be less in real terms.

With shares, by contrast, there is scope for returns to grow in line with inflation, or even exceed it. In the short term markets will rise and fall and this can feel painful to investors, however, by taking a longer-term view markets will actually go through a period of consolidation before starting to grow.

John BaxterComment