The BBC fudges savings vs investments report

| August 28, 2008 | 0 Comments
The BBC fudges savingsvs investments report

The BBC publishes a report: Savings returns ‘beating’ shares which makes the outlandish claim:

Savers putting their money in funds investing in UK stocks and shares would have made more money since 2000 by putting it in savings accounts instead.

To make such a claim requires extreme generalisation and a complete ignorance of investments.

It’s a complete straw-man argument, and a disingenuous piece of disinformation.

To underline this, ordinary investors seek to put money into shares on the basis that the equity of these shares will grow over the long term.

However, the stock market does see peaks and troughs, and it remains important that investors try to avoid investing at a peak - for the value of those investments will surely fall - and try to invest at trough prices - where the prices can only grow.

People who wish to invest should always make a point to research and understand exactly what they are investing into and why in the first place. Simply investing blindly only replaces strategy with chance, and chance is not a forgiving mistress.

At present the stock market is in a general trough, but in the year 2000 it was at a peak.

The impact of the Credit Crunch has hit share prices and investor confidence, and the FTSE 100 is trading at atound 5500 points in mid 2008.

However at the start of the year 2000, the FTSE 100 was around 6500 points, riding the dotcom bubble before it burst.

This illustrates why the BBC comparison is unfair - it measures from peak to trough, and almost certainly ignores the contributions of dividends as well.

This all underlines why people should educate themselves about the stock market, and seek to invest at a time of potential opportunity.

After all, if you’ve ever stepped onto a boat directly without a gangplank, you don’t close your eyes and then step forward hoping you’ll land safely in it - that would be ridiculous - you look and time your entrance properly.

The BBC’s failed figures

So take the BBC’s assertions:

If £1,000 was invested at the start of the decade, it would now be worth £1,094 in an average UK unit trust but £1,358 in a typical savings account.

If the BBC wishes to condemn unit trusts, then I’m not going to argue that point - but what I am going to contend is that this statement absolutely does not reflect on the stock market as a whole.

It’s a straw-man argument, because it’s kind of like saying that because a certain type of car is accident prone, therefore all cars are bad compared to other transport.

I’m a big believer that investments need to be actively managed, and that means if you can’t do it, then to entrust it with a reliable company to do it for you.

In the meantime, we’re seeing a big trough in the stock market, which makes it a ripe time to invest.

I posted on July 16th 2008 that financials had reached their bottom point - and I was exactly right.

I live by my words, though, and opened up a portfolio comprised of UK and US financial stocks that day.

Despite adverse trading conditions, and without day trading, that investment has still grown by over 11% in 6 weeks.

My lowest projected growth rate for this portfolio over 5 years is 350%.

Find a regular savings account that can match that, and I’ll be happy to save with it.

The simple truth, though, is that savings accounts are for those people looking for zero risks and zero rewards from it.

Which goes against the grain of stock market investments in the first place.

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