Question
I am depressed by the low saving rates and seeing my savings capital eroded by inflation.
I have received numerous mailings from Newsletters advising investment in High Yielding Shares. They claim if you purchase the shares they recommend each month then you have a better return and as you hold these shares for 'life' - you do not have to worry about how the share prices of the portfolio perform. You just enjoy the income. There are also suggestions that high yield shares tend to enjoy increasing share price.
Is this a good place to move my savings to as a retired man of 74 years of age. Isn't there a risk of capital loss?
Are there any other drawbacks of a High Yield share Portfolio?Answer
High yielding shares are a very different beast to a savings account and I would avoid unless you are comfortable potentially loosing capital.
The reason most of us have savings accounts is to hold 'rainy day' money in a safe place. So even if markets crash, reducing the value of investments you might hold, you still have a safety net to fall back on.
If your savings are well in excess of the amount of 'safe' money you think you'll need, then by all means consider investing some of the surplus provided you are comfortable with the risks. Otherwise, I would stick with savings accounts despite the depressing interest rates currently on offer.
It is true that the dividends paid by some companies are currently more attractive than savings rates, especially since dividends are deemed to be paid net of basic rate tax. And, since dividends generally tend to rise over time, such shares are a potentially good source of long term income.
However, share prices can fluctuate significantly, with even large companies sometimes seeing their share price drop by 20% or more during turbulent times. If you can afford to sit tight for several years in the hope of recovery you might deem the risk worth taking, but if not then I would be inclined to play safe.
And if you do want to invest then perhaps consider funds investing in higher yielding stocks rather than buying stocks directly. You’ll have to pay fund manager charges, but your investment should be spread far wider and the manager will (in theory at least) be keeping a close eye on things.
I am depressed by the low saving rates and seeing my savings capital eroded by inflation.
I have received numerous mailings from Newsletters advising investment in High Yielding Shares. They claim if you purchase the shares they recommend each month then you have a better return and as you hold these shares for 'life' - you do not have to worry about how the share prices of the portfolio perform. You just enjoy the income. There are also suggestions that high yield shares tend to enjoy increasing share price.
Is this a good place to move my savings to as a retired man of 74 years of age. Isn't there a risk of capital loss?
Are there any other drawbacks of a High Yield share Portfolio?Answer
High yielding shares are a very different beast to a savings account and I would avoid unless you are comfortable potentially loosing capital.
The reason most of us have savings accounts is to hold 'rainy day' money in a safe place. So even if markets crash, reducing the value of investments you might hold, you still have a safety net to fall back on.
If your savings are well in excess of the amount of 'safe' money you think you'll need, then by all means consider investing some of the surplus provided you are comfortable with the risks. Otherwise, I would stick with savings accounts despite the depressing interest rates currently on offer.
It is true that the dividends paid by some companies are currently more attractive than savings rates, especially since dividends are deemed to be paid net of basic rate tax. And, since dividends generally tend to rise over time, such shares are a potentially good source of long term income.
However, share prices can fluctuate significantly, with even large companies sometimes seeing their share price drop by 20% or more during turbulent times. If you can afford to sit tight for several years in the hope of recovery you might deem the risk worth taking, but if not then I would be inclined to play safe.
And if you do want to invest then perhaps consider funds investing in higher yielding stocks rather than buying stocks directly. You’ll have to pay fund manager charges, but your investment should be spread far wider and the manager will (in theory at least) be keeping a close eye on things.
Read this Q and A at http://www.candidmoney.com/askjustin/921/should-i-swap-savings-account-for-high-yielding-shares
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