Whichever side of the Brexit debate you sit on, you have to admit it has a lot to answer for. You don’t have to look far for nightmarish headlines regarding the damage already done and future threats:
And as Parliament descended into utter chaos last week, another Brexit casualty reared its head again as interest rates dropped once again. The uncertainty surrounding no-deal Brexit is being blamed for this blow which will directly affect millions of savers in Britain.
Last week major banks and savings institutions, including Lloyds Bank and National Savings and Investments (NS & I), announced cuts on rates to popular savings products. Instant Cash Isa account holders with Lloyds, for example, have seen a drop from an already paltry 0.35% to just 0.2%. This sparked speculation that more cuts would be seen in coming weeks and that rates could hit zero or even go negative, as has happened in both Denmark and Switzerland.
While interest rate cuts are good news for those with debts, they are really bad news if you have money squirreled away in the bank for a rainy day, an emergency fund or even to fund your retirement. And while there’s not much you can do about your emergency fund, which needs to be kept liquid so you can get your hands on it fast, you can and should take action if you have other savings languishing in the bank or building society.
With rates at their current low levels, many bank deposits are falling in real value because the interest rate is lower than the inflation rate and your savings are not keeping pace with the rising cost of living. And while a cut of 0.15% may not sound like much, it can make a huge different if you’re talking tens of thousands of pounds in retirement savings.
So if you have savings in the bank, how can you make your money do better? Stocks could be the answer. If you invest wisely you will not only outwit inflation but earn a far higher return on your savings. Historically, stocks are the highest returning types of investment yet many investors are too scared of the risks involved to take the plunge and as a result they are failing to meet their long-term investment goals.
That’s entirely understandable. Financial education is severely lacking in most countries and people are fearful of stock market losses so prefer to play it safe. Events such as the 2008 financial crisis also put off many investors although in actual fact, those who rode out the storm and stayed invested came out the other side ok as is usually the case for buy and hold investors.
While risk is ever present, whichever way you choose to invest, you can mitigate against it when you invest in stocks and you do that by diversifying your portfolio and paying careful attention to asset allocation. It’s key to invest across the different asset classes – stocks, commodities, property and cash – and to also diversify your investments across different industries and regions so that you balance out the risk and don’t have all your eggs in one basket.
Investing in stocks doesn’t have to mean poring over the financial pages every day working out what to buy and sell. In fact, that is a job best left to the professionals. You can buy ready-diversified funds off the shelf where the hard work is done for you. You simply have to choose one with a level of risk that you can tolerate. Here at Infinity we work with Tilney, a world-class fund manager, which gives our clients exclusive access to multi-asset portfolios (MAPs) to meet five different risk profiles from aggressive to defensive.
If you’ve been too scared to take the leap into investing in stocks but you’re fed up with bank deposits earning next to nothing, why not let us talk you through the process that we follow to ensure that all our clients only invest with a level of risk that they are comfortable with. That involves carrying out a Financial Needs Analysis and risk profiling. These are not nearly as scary as they might sound and could help you build wealth far more quickly than you are currently doing.
Email us for a no-strings appointment with one of our highly professional and experienced financial advisers and find out how to beat bank interest and create a brighter financial future for you and your family.
A leading provider of expat financial services and wealth management services across Asia.