THE DAILY TELEGRAPH: Britain's 38 million savers have been urged to invest their money in the stock market after being warned that for many of them it is now a "waste of time" putting their cash into a savings account.
The warning came after official figures indicated that the cost of living had increased once again in November, making it nearly impossible to earn a real rate of return on any bank or building society savings product.
As the London stock market closed at a two-and-a-half-year high, experts said that for many savers taking the risk of abandoning a deposit account and placing it in a high-yielding collection of shares was a more sensible option.
The dearth of decent savings products was laid bare by figures from the personal finance website Moneyfacts which showed that there were just three accounts – out of a total of 2,203 on the market – that paid a real rate of return, and only one for higher-rate taxpayers. >>> Harry Wallop, Consumer Affairs Editor, and Garry White | Tuesday, December 14, 2010
To suggest that people with hard-earned savings expose themselves to the vicissitudes of fortune that the stock market can bring within nanoseconds, and to suggest that it would be a good idea for the uninitiated to risk their future security on a market which is subject to the vagaries of the experienced investor, is the height of folly and irresponsibility on the part of Darius McDermott.
If this man is such an expert, he should know that the first law of successful stock market investing is to buy low and sell high. That means to say that it is not a good idea to buy stocks and shares at the top of the market. The fact that the stock market is at a two-year high should raise the alarm bells.
The stock market is highly speculative. One has to know what one is doing. It is no place for people who do not understand the workings of the marketplace. Moreover, it is certainly no place for the inexperienced. And that is especially true today, when the economy is so volatile, the world political situation is so fragile, and the financial system is in total disarray.
Further, it is sound advice, especially for people who have been savers hitherto, to avoid the stock market unless they have money they can well afford to lose. Because it must be stressed that the value of stock market investments, as we all know, can go down as well as up; and often so quickly that people do not have the time to take their money out of the market before a crash, before disaster strikes.
For people who wish to avoid future poverty, they might be better advised to ignore Mr. McDermott and hold on to their money, however poor the rate of return on their savings. At least they’ll end up with their capital intact. That way they will be keeping their powder dry for a time when the economy returns to a certain equilibrium, and returns to a state which rather more resembles normality. – © Mark
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