Is it Time to Break up with Your Bank?
Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.
Since the result of the referendum, many of you will no doubt be more eager to make your money grow. The easy option is to turn to your bank, but is this the right direction to take? By doing so you could be losing out on the potential growth that a stocks and shares investment could bring you. This article looks at why it may be time for you to break up with your bank and move into stocks and shares.
When you go shopping, are you put off by bad customer service from staff who continue their conversation whilst serving you? If so, why would you accept a product that basically does the same thing? When opening a savings account with your bank, you aren’t given a number of options to create an account customised just for you. Banks concern themselves mainly with generic direct saving accounts and lending. On the other hand, a good investment provider incorporates your goal and personal attitudes to risk. They require a certain amount of knowledge about your financial goals and go far beyond the one-size-fits-all interest rate offered by banks.
With a savings account from a bank, the product you save in is not personal to you and therefore, does not understand your needs. With True Potential Investor, you can choose a portfolio with a risk level you’re comfortable with.
Stocks Outperform Cash Over Time
If growing your money is what you’re after, then investing in stocks and shares for five years or more is more likely to give you a higher return than a cash account. For instance, a study by Barclays shows the probability of equities outperforming cash over a two year period is 68%, which rises to 75% over five years and 99% over 18 years.
At present, if you were to open a savings account, the highest rate of interest you could expect today would be 1.27% AER. However, as with many savings accounts, it is important to be aware that this is just an introductory offer and these rates will drop significantly after the introductory period. In comparison, the average rate of growth for stocks and shares is 7.4%.
With True Potential Investor, you can open a Stocks & Shares ISA from as little as £50, track your investment 24/7 and top up your account with as little as £1 on-the-go.
However, achieving good long-term returns isn’t just about being in any markets for as long as possible – it’s about being in the right markets for as long as possible. This being said, it’s important to appreciate that past performance of investments is not necessarily a reliable indicator of their future returns.
Diversify Your Investment
One of the advantages of investing your cash rather than saving it, is that by investing in a multi-asset portfolio, such as our Managed Portfolio Series, means that you’re not putting all of your eggs into one basket. With a Cash ISA or savings account, your savings are solely held as cash. However, by investing your savings in to multiple assets across geographical regions, you’re giving them the opportunity for much better growth
Banks are generally more concerned with the financial aspects of their business and therefore, have not traditionally hired technology development teams. This is slowly catching on, however, investment management firms took this leap ahead of the banking world and created some outstanding pieces of tech to benefit their clients.
We were at the forefront of this initiative, releasing the worlds-first top-up technology, impulseSave®, in 2014. This enables clients to top up their investment anytime, anywhere. This has proven to be successful with over 17,500 impulseSaves® and over £41.5m invested.
Many people turn to their banks to save simply because they are unaware of other routes and the greater growth potential in the investment market. However, if you want your hard earned cash to grow, then it could be time to break up with your bank and invest your money into a Stocks & Shares ISA, such as the one available with True Potential Investor that comes with a free transfer service.Transfer