Invest or Save?

Hi Everyone,

I'm thinking of opening a savings account and putting money into it each month. Do you think this is a good idea? Any recommendations on which are the best savings accounts? or would it be better to put the money into a brokerage account and invest the money?

My main worry is if the market goes down then I could lose my money!

Reply 1

SteelCookie

Only invest if you know what you are doing. The current interest rate means your money is losing value very quickly the longer you keep it in there; it's an incentive to invest. However, by investing wisely, you'll retain the value of your money at the very least in the future and better yet, could get some returns in increased value or from dividends.

A market crash will happen eventually but the market will go back up and it always has.

Reply 2

Miss Maddie

Original post by Mongo84

Invest everytime and forget saving. If you had £1m and put it in the bank a good interest rate would give you 5% at the most if you were lucky. By year's end you would have gained £50,000. For that £1m you could easily build five houses for £200,000 each. Sell them all for £250,000 each making a nice £50,000 on each property. In a year you've gained £250,000.

Property developing is a fantastic industry to invest and make money. If you have the capital in the first place to build or buy the property before renovating and selling it's near impossible to go bust. The property developers who you hear going bust are the ones who borrow the moeny to build or buy so they hope to sell and pay off the loan, but if the house doesn't sell they can't pay off the loan so default. If it's their own capital, they don't need to be in that rush to sell off houses.

I would recommend investing :smile:

Reply 3

Rakas21

Original post by Mongo84

How much money are we talking about?

Reply 4

Reue

Original post by Madeline_H95

Invest everytime and forget saving.

Except if you were saving for a house deposit for 2 years and the markets crashed during that time?

People shouldn't invest for short/medium term goals.

Reply 5

Miss Maddie

Original post by Reue

Except if you were saving for a house deposit for 2 years and the markets crashed during that time?

People shouldn't invest for short/medium term goals.

I see your point. Investing in property would work out over the long term provided the property wasn't on a cliff which was being eroded away or near a development site but in the short term where market shocks are amplified, saving can be a better bet.

Reply 6

Reue

Original post by Madeline_H95

Investing in property would work out over the long term

I think you ought to look at the situation in Northern Ireland and America before assuming property investment always works out :wink:

Reply 7

Miss Maddie

Original post by Reue

I think you ought to look at the situation in Northern Ireland and America before assuming property investment always works out :wink:

That's true, luckily property investment and the UK seems to have been unscathed compared to other countries provided the owners or investors ride out the storm. Prices always climb in the long term. 90% of the time. It's a safe bet compared to stocks usually. Iceland is the example of the biggest collapse.

Reply 8

Reue

Original post by Madeline_H95

NI is in the UK..

But anyway. Prices dont always climb in relation to inflation. As with all forms of investment: There is a level of risk.

Reply 9

Miss Maddie

Original post by Reue

NI is in the UK..

But anyway. Prices dont always climb in relation to inflation. As with all forms of investment: There is a level of risk.

If you excuse me I should have said Britain to be clearer :wink:

NI is more affected by Ireland than Britain in the property market.

What investment does see annual returns greater than inflation? Real term value is always lower but investment is generally still higher in real terms compared to interest rates (especially now when they're 0.5%)

Reply 10

Rakas21

Original post by Reue

I think you ought to look at the situation in Northern Ireland and America before assuming property investment always works out :wink:

Original post by Madeline_H95

Prices will only increase so long as demand exceeds supply. Now that's all fine now when we're not building many houses and have high immigration but consider that if a government came to power and caused net emigration in addition to a house building programme, you'd see prices fall because our birth rate excluding immigrant births is low. In Japan they lose 250,000 people each year due to a low birth rate and net emigration, house prices have still not recovered to the level they were in the early 1990's recession.

Finally i'd point out that a lot of house price growth in the UK is tied into credit supply (because wage growth is low and we have a culture that likes leveraging themselves), should restrictions on credit supply occur or banks be left to it (after the recession lending levels dropped to those in the late 70's - banks were risk adverse) then we could easily see falling house prices given the lack of affordability in the UK.

..

Point being that the UK housing market is more complex than appears on the surface.

Reply 11

Miss Maddie

Original post by Rakas21

The other thing to bear in mind is that Britain's often rush into the property and take the lowest monthly payments possible on a 25 year mortgage, this means that your likely to have to ride out two periods of high unemployment where your chances of being made redundant and potentially losing your home are minimal. I'd prefer a 10 year mortgage personally.

Prices will only increase so long as demand exceeds supply. Now that's all fine now when we're not building many houses and have high immigration but consider that if a government came to power and caused net emigration in addition to a house building programme, you'd see prices fall because our birth rate excluding immigrant births is low. In Japan they lose 250,000 people each year due to a low birth rate and net emigration, house prices have still not recovered to the level they were in the early 1990's recession.

Finally i'd point out that a lot of house price growth in the UK is tied into credit supply (because wage growth is low and we have a culture that likes leveraging themselves), should restrictions on credit supply occur or banks be left to it (after the recession lending levels dropped to those in the late 70's - banks were risk adverse) then we could easily see falling house prices given the lack of affordability in the UK.

Point being that the UK housing market is more complex than appears on the surface.

But in the UK I can't see a government building on a large scale or reducing immigration enough to have a considerable effect on the housing market. Constantly having demand exceeding supplu forever keeps the construction industry ticking over with allowing a compelte skills wipe out like we saw with large-size ship building in the UK and helps control deflation (arguably as if houses are cheaper people have more moeny so spend more causing inflation but economists are debating this).

The luxury UK house market is where the real money is. If you have land around Sandbanks and the capital to build, you'll be able to find some Russian billionaire willing to buy. It's how most developers in S. England made money.

There's a new industry starting too whereby the houses are being renovated and sold on keeping supply minimal and not increasing the overall number of homes.

(edited 9 years ago)

Reply 12

Mongo84

Original post by Rakas21

How much money are we talking about?

I have £10,000 right now which obviously isn't enough for investing in property. After looking around what do you think to a FTSE 100 ETF? Rather than investing it in a couple of companies.

Reply 13

Rakas21

Original post by Mongo84

I have £10,000 right now which obviously isn't enough for investing in property. After looking around what do you think to a FTSE 100 ETF? Rather than investing it in a couple of companies.

There's room for the upside for the FTSE but it won't be significant growth I think. Worth going for it though I think.

Reply 14

Mongo84

Original post by Rakas21

There's room for the upside for the FTSE but it won't be significant growth I think. Worth going for it though I think.

Are there any other ETF's that you think would be better? Gold?

Reply 15

Rakas21

Original post by Mongo84

Are there any other ETF's that you think would be better? Gold?

Gold fell 20% last year and should fall over the next few in my opinion.

You'd have to look at various stock exchanges and find one you consider undervalued. As I say though, there's probably movement up over the next year or two for the FTSE.