PLANNING
A look at history
Any cash you put in a savings account will grow steadily, determined by the
interest rate paid by your bank or building society.
account – and equities, stretching from the end of
1899 to the end of 2012.
However, the returns on equity-based investments
are not guaranteed and the value of your money will
rise and fall in line with the performance of the
companies you invest in.
As the holding period grows, so does the likelihood of
equities beating cash. Over five years there is a 75 per
cent probability that equities will outperform cash,
rising to 90 per cent over 10 years and 99 per cent
over 18.
If you only invest for a short period of time, it is entirely
possible that you will lose money, but over longer
periods history has repeatedly shown that equities
grow faster than cash. If you were to plot your returns
over 10 years on a graph, you would see – peaks where
the value of your investment rises – and troughs,
where it falls. However, over time it is likely that there
will be more ups than downs and at the end of that
decade you will have both more than you originally
invested and more than you would have if you left
your money in a savings account.
To put these figures into context, if you invested £100 a
month into a typical savings account you would have
£12,305.79 after 10 years and £26,670.92 after 20 years.
Whichever way you look at it, this is a tidy little nest
egg, but it would be a lot more impressive if it had
been invested in equities – that same £100 a month
investment would be worth £19,594.66 after 10 years
or £56,344.56 after 20 – more than twice as much.
Barclays has conducted extensive research comparing
real returns on cash – that is, with inflation taken into
UK real return on £100 since 1900
£100,000
Cash real returns
Gilts real returns
Equities real returns
£10,000
Total return
£1,000
£100
As you can see, there are lots of ups