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With Interest Rates So Low Should I Invest My Money Elsewhere?


Now before I start any form of investment contains risks. Nothing in this article constitutes financial advice but hopefully it will give you a clearer picture of how the markets work. In the UK we are 0.1% interest rates. This is rate set by the Bank of England. Interest rates are lowered to stimulate the economy as they hope people are more inclined to borrow money, this increases spending within society and keeps the banks ticking over. However, if you’re a saver, 0.1% interest is pointless. You’ll probably find more money at the back of your sofa.

For example if you have £10k in savings and your interest rate is the current base rate of 0.1% you will make a whopping £12 a year. When you take inflation into account you will be losing money. But wait, banks aren’t offering you the base rate, they are offering 0.01%! So you will make a grand total of £1 a year! (Don’t spend it all at once). To top it off the government are now looking at negative interest rates! So what are your options? I’m an advocate of managing your own money. There is no reason why any regular person can’t invest their own money. We are conditioned to believe banks are our best options but they aren’t, not in my opinion anyway.

The stock market is where wealth is made, this is why the rich get richer, they can afford to pay people to look after their money for them. For the regular person the fees associated with a lot of investment firms can make it counter productive based on the returns they will get you. So what are your options? Well, you have two, ETF’s & Stocks. I won’t delve into stocks today as they are more complex for your average person and you do need to know what you’re looking at when analysing a company so today I will talk about ETF’s. ETF’s (Exchange Traded Funds) are basically a basket of companies grouped together in one fund. There are ETF’s for everything from green energy, to electric cars, to oil funds, the list is endless but there are a few that I would recommend to any amateur investor. The main two being QQQ (or EQQQ if you’re in the UK) and VOO. The QQQ tracks the Nasdaq 100 which consists of 100 of the largest market cap US companies excluding financials like banks. Over the last 10 years the QQQ has returned on average an astronomical 22% per annum. If you invested £10k in 2010 it would be worth £64k today, I’ve attached a chart below.

More info: https://www.invesco.com/us-rest/contentdetail?contentId=3a48e01e98630410VgnVCM10000046f1bf0aRCRD&dnsName=us&audienceType=investors

VOO tracks the S&P 500 which tracks 500 of the largest companies in the US. The VOO is far more diversified than the Nasdaq. Over the last 10 years VOO has returned just over 14% per year on average. So again, if you invest 10k in 2010 you would have around 37k today. More info: https://investor.vanguard.com/etf/profile/performance/voo/cumulative-returns

When you compound these returns over 15, 20, 30 years the end result can be the difference between retiring at 55 or 70. Try out a compound calculator and see for yourself. There are very small management fees attached to both which come in at 0.03% for VOO and 0.2% for QQQ which are tiny when you look at the returns. Years ago you would have to pay an investment firm to invest in these funds for you. They’d charge transaction fees, platform fees etc which eats into any profit you make. With the advance in technology it has become a lot easy for you and I to invest in these markets. I personally use two platforms. I have a Trading212 ISA, Invest and CFD account and I have an account with eToro which allows anyone to copy my investment strategy for FREE, I'm currently up 37% YTD. There are no fees with either of these brokers, there are no management fees and they are both regulated by the FCA so you get the same protection as you would with a high street bank. You can download a demo of both and try it out before you invest. If you do try out eToro give me a follow : Follow My Trades on eToro Good luck on your investment journey!

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