Question
The historical real return on different asset classes. I wonder if you could publish figures for the inflation-adjusted return on asset classes, cash, gilts, bonds, equities etc., over various periods with your comments on how they should be interpreted? Figures for cash are often given without any details of whether they refer to LIBOR,
'average' savings rates, or the best savings rates that could reasonably be obtained.
Thanks for a great site.Answer
I agree that inflation-adjusted return figures are potentially far more useful than unadjusted figures. It’s something I’d definitely like to feature, along with lots of other statistical ideas I have, however getting hold of the underlying data is sadly not cheap. I looked at this when building the site and the price tag runs into thousands of pounds. Until such a time the site generates sufficient revenue I can’t really justify the expense.
You’re right to point out that cash figures are quite often ambiguous. When not specified it’s most probable that the data used is either an average of savings accounts or the Bank of England Base Rate – you'd expect returns from both to be lower than had you consistently held money in ‘best buy’ accounts (of course, most people don’t!). Tax is also an important factor that’s rarely reflected in such data. Unless you save/invest via ISAs then interest and growth will likely be taxed. Growth investments tend to fare better than savings in this respect (unless you’re a non-taxpayer) as individuals might be able to use their capital gains tax allowance to offset some, or all, gains.
I do have inflation data so I'll look at incorporating this into the savings charts already on the site.
The historical real return on different asset classes. I wonder if you could publish figures for the inflation-adjusted return on asset classes, cash, gilts, bonds, equities etc., over various periods with your comments on how they should be interpreted? Figures for cash are often given without any details of whether they refer to LIBOR,
'average' savings rates, or the best savings rates that could reasonably be obtained.
Thanks for a great site.Answer
I agree that inflation-adjusted return figures are potentially far more useful than unadjusted figures. It’s something I’d definitely like to feature, along with lots of other statistical ideas I have, however getting hold of the underlying data is sadly not cheap. I looked at this when building the site and the price tag runs into thousands of pounds. Until such a time the site generates sufficient revenue I can’t really justify the expense.
You’re right to point out that cash figures are quite often ambiguous. When not specified it’s most probable that the data used is either an average of savings accounts or the Bank of England Base Rate – you'd expect returns from both to be lower than had you consistently held money in ‘best buy’ accounts (of course, most people don’t!). Tax is also an important factor that’s rarely reflected in such data. Unless you save/invest via ISAs then interest and growth will likely be taxed. Growth investments tend to fare better than savings in this respect (unless you’re a non-taxpayer) as individuals might be able to use their capital gains tax allowance to offset some, or all, gains.
I do have inflation data so I'll look at incorporating this into the savings charts already on the site.
Read this Q and A at http://www.candidmoney.com/questions/question150.aspx
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