By Annabel Brodie-Smith
With interest rates remaining at rock bottom and inflation reaching 1.8% last month (the fourth consecutive month inflation has risen), investors face a bleak prospect when it comes to what their income from their investments will buy them now and in the future.
Bearing this in mind, we’ve looked into what would have happened to a £100,000 portfolio invested in the average UK Equity Income investment company over the past 20 years. Did you know that this would have generated an annual dividend growth of 4.5%? This is an inflation busting 2% ahead of inflation over the period. Having enjoyed this income, investors would have still more than doubled the capital value of their portfolio over this period too, up 127%, although it will have been a bumpy ride along the way. You can read more about this on the next page.
Despite recent strong markets, the AIC’s research showed that investor confidence is unmoved from where it was a year ago, when markets were much more volatile, with only 25% of investors planning to increase their stock market exposure (see page four).
Brexit concerns, the Trump presidency and worry over a market crash are clearly hanging heavy in many investors’ minds. Of course investors, as ever, need to take a long-term perspective of their investments and, as the end of the tax year approaches, David Prosser brings this message home in his “Who wants to be an ISA millionaire?” article.
Finally, we are taking a look at the investment companies which invest in the peer-to-peer (P2P) loan market. Traditionally individuals or businesses would save their money in a bank and the bank would lend that money to other individuals or businesses. Peer-to-peer lending removes the bank from this process and a number of investment companies are now investing in this market. Find out more about these companies which have had a year of mixed fortunes and hear the manager views on prospects for the peer-to-peer sector.
Have a great month – let’s hope spring arrives soon!
Annabel Brodie-Smith, Communications Director, AIC