Savings over 5years

tarren

Hi,

If £200,000 had been invested in the average bank\building society savings account over the last 5years, how much return for a basic tax payer could have been expected, tax paid?

Information would be gratefully received.

cheerfulcat

Hi, there,

It kind of depends; the return would be greater if the interest was left to compound. Assuming a return of 3.2% ( don't forget, rates were extremely low for part of that time ) after tax, and reinvesting the interest, you'd have received around £34,000.

Lots of calculators here -

http://www.thisismoney.co.uk/tools-and-calculators/calculators/index.html?in_page_id=86

HTH

Cheerfulcat

tarren

Thank you cheerfulcat, I asked, because an associate of mine has a portfolio set up by a financial adviser which has returned just over £6000 over that period.

He is being advised to maintain this portfolio, as he should expect better returns sometime in the future.

I'm no expert, but I would have thought savings accounts would have been a better bet, but would he be better off shifting his monies into a savings account now?

Thank you for your input.

cheerfulcat

Hi,

The stock market has produced a much better return than cash deposits in the past. Unfortunately, the quasi-index tracker nature of most managed funds, combined with the hefty ( sometimes invisible ) charges, make them IMHO mostly a bad investment compared to directly held shares.

Would he have the time/inclination to do his own stock picking?

Cheerfulcat

deemy2004

tarren wrote:

Hi,

If £200,000 had been invested in the average bank\building society savings account over the last 5years, how much return for a basic tax payer could have been expected, tax paid?

Information would be gratefully received.

Five years £200,000 - average Building society notice account. Start 2000 to End 2004. With interest re-invested

£41,437 NET

Tax Paid £10,359.

deemy2004

tarren wrote:

Thank you cheerfulcat, I asked, because an associate of mine has a portfolio set up by a financial adviser which has returned just over £6000 over that period.

He is being advised to maintain this portfolio, as he should expect better returns sometime in the future.

I'm no expert, but I would have thought savings accounts would have been a better bet, but would he be better off shifting his monies into a savings account now?

Thank you for your input.

A £6000 from a stock portfolio over the last 5 years given the collapse in the stock market is okay, not great not bad. Bad would have been your portfolio being worth less than 50% of where it was in 2000.

Obviously as compared against a zero risk savings account is abysmally poor performance, as he has lost money in real terms

Future returns depend on what he is holding..

dunstonh

Any growth in a period which contains a major stockmarket crash is not too bad. It could be better but you dont say what the fund spread is. Some of the top UK funds would have provided in excess of £100k on top of your 200k over that 5 years and I am not looking at past performance there. I am referring to the top sold funds of 5 years ago.

If you dont like the volatility, then don't invest in it. If you are invested in one fund, then spread it wider over multiple funds and investment areas. This can be done within one bond or provider nowadays.

tarren

Hi,

I want to thank you all for your observations.


I believe my associate is so disappointed with his return, he's going to play safe and reinvest in Bank\building society accounts.

Just one question, where do you think interest rates will be in perhaps 2\3years?

tarren.

deemy2004

Three years from now........... base rates around 6%

Though with RPI likely around 4% he is not going to end up with much net real profit, still a profit is a profit

tarren

Thank you for that deemy2004, but at least shifting it into savings of some sort it will ensure his capital remains intact.

Thank you all again.

tarren.