What are investment markets doing now?
Interest rates for cash deposits have increased as the Bank of England increases the base rate.
Loans to the Government and companies have risen – so they are generally providing better returns. Let’s not talk about the flip side of the coin, rising mortgage costs.
Commercial property, as a category, has seen some increases in value, and some portfolios and funds are providing increased returns in some sectors – however, there are also empty properties and closed businesses in some areas – so the outcome remains difficult to quantify.
Equities have performed erratically in the UK, across Europe, the Americas, and some developing economies.
Most investment portfolios combine these underlying assets intending to increase returns. We are not out of the woods yet, and there could be more unplanned events that could take investments higher or lower.
So, we should consider the timescale that investment is intended for rather than what might happen in 2023. For example, a pension investment will target when retirement is likely. A fund to help a child embark on further education may need to focus on another timescale.
If you need funds for immediate or short-term reasons, it is likely that a cash deposit that provides easy access is more important than searching for the highest interest rate. Inflation is expected to be a more significant threat for more medium to long term cash savings where returns are likely to be well below increases in the cost of living and losses will occur in real terms. One has to consider what is most important.
History shows us that a well-diversified investment usually outperforms a cash deposit over the medium to long term, although, there will always be exceptions.
All savings and investments should be protected from taxation. There is no cost in using an ISA, you are only limited by the annual allowance, and a couple can use both their allowances and the option to use successive annual tax year allowances should be used where appropriate. A tax efficient pension may also work for longer term savings for use in later life or retirement.
If you are interested in maximising the return on your savings or would like a different view on your existing holding please get in touch.
Eamonn Dorling Dip PFS
Senior Independent Financial Adviser
Brooks Wealth Management
Tel: 01733 314553 or 07767 795816
Email: Eamonn@brookswealth.co.uk