Shouldn't everyone who hasn't a clue receive 6 - 9% tax free on their investments ?

eskbanker

Porcupine wrote: »

It's a pity that nobody told institutions that:


(from Cumberland Building Society)

is a particularly special example, but such confusion is common. For example this webpage:
https://www.harpendenbs.co.uk/savings.asp
has 'savings' in the link but talks about 'investment rates' and all the accounts are savings accounts.

And let's not get started on building societies offering 'bonds'. And then people getting confused when Tesco also issues 'bonds', or their favourite football team.

agarnett wrote: »

By the way, I notice no-one yet has picked up that S&S ISAs are still officially termed "Individual Savings Accounts" as opposed to "Individual Investment Accounts" !

I don't think anyone is denying that in some circumstances 'saving' and 'investment' are misused as if they were synonymous, but that doesn't mean they are synonymous! Aside from all the rhetoric, is anyone on this thread seriously claiming that they don't know the difference?

eskbanker

agarnett wrote: »

My main question in starting this thread was how ordinary bank customers could without consciously taking any risks have achieved an average of 6 to 9% pa growth in their capital over 9 or 10 years?

Since I started the thread, a number of posters have asserted that these ordinary customers either chose to take risks or took risks without realising it.

I assert that if real risk exists (and yes 2008 -2010 was very bumpy) all ordinary customers take risks when they buy products put under their noses without realising what those risks are exactly or even at all.

I suspect we're going to need to agree to disagree here, but the facts would seem to be that a family made one or more investments which produced returns of 6-9% without them knowingly accepting investment risk (of capital loss).

Your conclusions from this would seem to be (a) that this mis-selling is typical (based on extrapolating this example with some confirmation bias) and (b) that returns of 6-9% should be expected as the norm because if they weren't aware of risk (relative to protected-capital saving) that meant there wasn't any!

Eco_Miser

eskbanker wrote: »

It's not a suggestion that saving and investing are fundamentally different things, it's a fact!

It's a useful distinction to make, but none of the government, banks or National Savings and Investments (which doesn't seem to offer Investments any more) make the distinction that savings are deposits at interest, and investments are purchases of equity or loan instruments. While there are two different things the terms savings and investments, especially the latter are used somewhat interchangeably for both.

ETA: the above was written before I saw Eskbanker's response to Porcupine.

I checked the OED, invest means apply or use (money), esp. for profit. That would cover putting it in a bank at 5% interest, as well as buying shares.
savings is money saved and certainly all my investments are of money I saved.

eskbanker

Perhaps we should be lobbying for this board to be renamed the Savings & Savings Board or the Investments & Investments Board?!

AndyT678

Eco_Miser wrote: »

I checked the OED, invest means apply or use (money), esp. for profit. That would cover putting it in a bank at 5% interest, as well as buying shares.
savings is money saved and certainly all my investments are of money I saved.

I think I would argue that money "applied" or "in use" is not saved by definition.

If I use my money to buy a car then I haven't saved it, I have exchanged it for a depreciating asset.

Similarly if I use my money to buy a share of a company then I still haven't saved it, I've exchanged it for a different, hopefully appreciating, asset.

Either way it's not "savings".

Pincher

I have a flat, bought off plan in 1996, completed in 1997.
Including some conveyancing etc., we (the family) paid about £200k in 1997. If you believe Zoopla.co.uk, it's worth £796k now.


£796k from £200k in 17 years is 8.46% growth compound.


The building was not really habitable initially, as we were phase one, but it achieved about 100% occupancy over 17 years once we decorated. The rent was around £1,800 a month in the beginning, and is now £2,500 a month. So the gross yield was 10.8% 17 years ago, and 3.75% these days.


Obviously there were all kinds of expenses, like repair and maintenance, service charge (£2000 a year in the beginning, £5000 a year now), etc.


Without considering capital gains tax, I should be able to claim 9% annual growth, compound. This is based on £200k cash investment, which is sadly actually what we did: because the family members are amateurs.


If I had been allowed to borrow £100k on an Interest Only basis, the returns would be calculated in terms of £100k investment, not £200k. The interest would have been tax deductible over the 17 years. I would say the return could be 12% annual compound if we had better structuring of the finance and tax planning.


So, amateurs 9%, me 12%. All at pretty low risk levels.

agarnett

So, amateurs 9%, me 12%. All at pretty low risk levels.

Yes, and fund manager pros - one wonders what have they been doing with all that cash ISA money over the same period - lending it out at 0.45% over base, interest only I suppose :rotfl: ?

Pincher

AndyT678 wrote: »

I think I would argue that money "applied" or "in use" is not saved by definition.

If I use my money to buy a car then I haven't saved it, I have exchanged it for a depreciating asset.

Similarly if I use my money to buy a share of a company then I still haven't saved it, I've exchanged it for a different, hopefully appreciating, asset.

Either way it's not "savings".

But if inflation is 3%, and your deposit account pays 2%, that isn't "savings" either.


Even with gold, which is a traditional way of preserving value,
it was a much more volatile ride than anyone imagined during 2007 to 2015.


All you can do is to thank Richard Dawkins that you are not descended from Argentinians, or Greeks.

jimjames

agarnett wrote: »

Yes, and fund manager pros - one wonders what have they been doing with all that cash ISA money over the same period - lending it out at 0.45% over base, interest only I suppose :rotfl: ?

Fund managers don't lend out cash ISA money.

Fund mangers invest money from S&S ISAs.

I can borrow at 2.5% and get 5% interest on my savings. That's great for me but not necessarily a sustainable business model for a bank.

Eco_Miser

AndyT678 wrote: »

I think I would argue that money "applied" or "in use" is not saved by definition.

If I use my money to buy a car then I haven't saved it, I have exchanged it for a depreciating asset.

Similarly if I use my money to buy a share of a company then I still haven't saved it, I've exchanged it for a different, hopefully appreciating, asset.

Either way it's not "savings".

and if I use my money to earn a safe 5% in a bank account? Is that really saving, or is it investing?

I wasn't saying that money used to buy stuff was saving, but that money used to earn more money was investing.