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Why bother investing when interest rates are so good?

3 minute read

We discuss five reasons to favour investing for long term savings.

Who's it for? All investors

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice.

Savings rates are looking far more attractive now that the Bank of England base rate has risen 13 times from an all-time low of 0.1% in December 2021 to 5%.1

With rates of around 5% available2 investors might be tempted to deposit money for their future in savings accounts where a return is guaranteed.

Savings accounts are an ideal home for your rainy day money – that is, emergency cash worth around six months of your earnings to cover expensive boiler repairs or for new tyres on the car.

However, it’s important to remember why you started investing in the first place – because that likely still rings true even with interest rates now higher. Investing continues to provide the potential to increase your wealth by more than if you just leave it all in savings.

That’s because stock markets tend to perform better than cash over the longer-term.

Here are five things to remind you why continuing to invest can help boost your financial future.

1. Stock markets beat cash

Over a ten-year period shares have beaten cash 91% of the time3 . You should never rely on past performance, but the figures remain compelling.

2. A greater chance to beat inflation

The problem for savers is that higher inflation means their money is ultimately worth less over time. And for this reason, it's a good idea to explore options which might be able to provide you with better protection against inflation such as investments in stocks and shares.

Times of high inflation can actually benefit investors because during such periods companies will often increase their product prices when their underlying costs start to rise. As a result, company earnings may have the potential to keep up with inflation.

3. You can spread the risk

While there is an element of risk when investing, there are ways to manage that risk. Opting for a fund which invests in a wide spread of companies is less risky than putting your money into just a handful of shares.

When you invest in a fund, your and other investors’ money is pooled together. A fund manager then buys, holds and sells investments on your behalf.

Funds can invest in companies in the UK, other countries or regions, or across the globe to give you exposure to regions such as Asia, North America and Latin America as well as markets closer to home in Europe. Buying funds focussed on different areas or industries can help you spread your risk even more.

4. Help is at hand

Investing can seem daunting but there’s plenty of help at hand to guide you should you wish to review your portfolio.

If you’re looking for funds you can take a look at our Barclays Funds List to do some of the legwork for you when it comes to narrowing down the huge choice. Our list is made up of Active funds, Tracker funds and Barclays Multi-Manager funds , selected to cover the sectors we believe are key to building a balanced and diversified investment portfolio. The Active and Tracker funds are run by many different managers in the UK and Europe, while the Barclays Multi-Manager funds are run by Barclays' own investment experts.

For those looking for UK shares there is help in our research centre where you’ll find information and news about UK-listed companies.

If you’re looking for international shares you can find out more about the access we offer to companies on 10 exchanges including ones in the US, Germany, and Canada. If you’re interested in what international shares are being bought by other Smart Investor customers, you can find a list of the most popular shares bought each month.

If you can’t face the choice, you can opt for a Ready-made Investment fund where we make the selection for you. All you need to do is pick the risk level (there are five options) and we’ll do the rest.

5. Investing and compounding

Many investors receive an income through dividends. Reinvesting dividends could potentially boost your overall returns. That’s because your returns will also earn returns, which is known as compounding. Dividends are not guaranteed, however.

Find out more about the magic of compounding.


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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

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