Rock bottom interest rates are creating a dilemma for savers. While setting money aside for a rainy day seems like a sensible move at face value, the money that is held in savings accounts is not getting customers a good deal. Indeed, earlier this year it was found that just three per cent of current accounts in the UK was keeping up with or beating inflation.
For the vast majority of people, therefore, the money they have squirreled away is losing value in real terms while sitting in a savings account.So, if you want to make your money go further, what should you? Where can you turn to get a better return that a savings account?
Tap into the power of the markets
While there’s always a degree of risk with every investment on the stock market, there are also much better returns to be had from investing your money here. The key is to understand what you’re getting yourself into and picking a product that comes with a level of risk that you’re comfortable with.
Stocks and shares ISA
: From 2017/18 you can now put £20,000 a year into a stocks and shares ISA. This can effectively act as a ‘wrapper’ around a number of different investments and allows you to hold these in a tax-efficient way. You can split your allowance between cash and shares, so this might be a way of graduating from a standard ISA into a market investment if you’re nervous.
: You can invest in funds that follow a particular index (such as the FTSE 100), investment (real estate) or engage in commodities trading (oil, gold or livestock). Research from AXA shows that a 10-year investment in the FTSE 100 delivered an average return of 70 per cent and a 95 per cent chance of at least some increase, showing this to be a fairly safe bet.
: In a turbulent political world, currencies have had a number of rises and falls in recent months. Smart investors can spot trends and benefit from the rise of one currency in relation to another. Some investors been able to make money from the fall of the pound since last summer EU Referendum, for example.
Peer to peer lending
You could also try something a little different and opt for peer to peer lending. Using one of the many platforms which has popped up in recent years, your money could be used to help ‘crowdfund’ an up and coming business. Without banks acting as a ‘middle man’, this form of lending is able to offer favourable rates to both borrowers and lenders and people can rest assured that companies will have to have meet a set criteria in order to be selected. In essence, this runs similarly to any other fun – and can easily deliver a return ten times better than that of a savings account.
Try before you buy
For rookie investors, it’s worth bearing in mind that it is possible to try out your trading tactics and techniques before you test them out in the real world. Set up a demo account and see for yourself if you would be able to succeed as an investor before you put any of your own money on the line.