Equity markets prove rewarding option for investors seeking low-risk income
With the UK’s base interest rate currently standing at its lowest level since the Bank of England was founded in 1694 and little prospect of a significant rise in the near future, it seems likely that low interest rates are here to stay, at least until the end of 2017, significantly outstripped by annual inflation of around 3.5 per cent.
So if you are investing for income through cash-based accounts, at the moment you are probably suffering a loss in real terms; the best cash bond at a major institution presently earns 1.47 per cent gross, fixed over two years.
This financial environment has left many investors, especially the elderly, coping with a significant income reduction – so, what is the best solution?
Many investment clients need good income returns without touching their capital for up to five years and, on this timescale, the equity markets currently offer an attractive option.
Historically, it is unusual for shares to offer a more solid investment option than cash-based alternatives – consider the 1980s when, under Margaret Thatcher’s government, base interest rates rose as high as 17 per cent and it was common for private individuals to earn up to 10 per cent on cash funds.
Currently, shareholdings in FTSE 100 companies, for example, can produce gross dividend yields of between 3 and 6 per cent – in today’s climate, this is an attractive return for investors looking for income-producing options, and making use of your personal annual Capital Gains Tax exemption will mean you pay no tax on profits under £11,300.
Alternatively, investing in cash-based accounts can ensure your capital remains nominally intact, although your money will buy significantly less in five years’ time if inflation continues to outpace interest rates.
Investment ‘risk’ is a curious concept. Everyone is different of course, and only you can decide how much risk you wish to take compared with the returns you wish to achieve. That is where expert advice comes in, and George Ide’s experienced investment specialists can explain the different types of investment currently available to help you find an option that suits your circumstances.
And remember, tying up your capital in fixed-term cash-based investment products is not the only way to obtain meaningful capital growth and income returns – we currently successfully manage significant market-based equity funds offering access on short notice without penalty.Business, General, George Ide, Investment, News