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The ‘Real £1’

The new 12-sided £1 coin went into circulation this week.  

And given that I’ve worked in the wealth management industry for almost 30 years, I couldn’t resist pulling some words together.  

Essentially, since the original issue date of the round £1 coin on 21 April 1983, the return on cash (measured by the return on the Bank of England’s Base Rate) has been 565% and the total return on the main UK stock market (measured by the FTSE All Share Index) has been 3105%.   

In other words, the returns from investing in shares have been 5.5 times the returns from cash.It’s clear that investing in shares has been a winner.  

What’s also fascinating is winding time back to 1983, where you can discover what people could buy with a then ‘new’ round pound.  

Around 43p would get you a pint of milk in 2016 for instance, whereas in 1983 you would only have needed 21p.  

Which brings me onto inflation 

If you take into account inflation (measured by the Retail Price Index), which has risen by 218% between 1983 and now, then the real return (after inflation) from cash has been 347% (565% minus 218%) but the stock market still wins by far with a real return of 2887% (3104% minus 218%).    

Here, the real returns from holding shares has been over eight times that of savings in cash. 

Equilibrium aims to provide investment returns well ahead of inflation over time. Whilst undoubtedly with investing we have seen some losses over the years and we will likely encounter them in future, overall the company has an impressive track record during its 21 years in business. 

More recently, in 2015, we setup the Equilibrium AIM Portfolio, which has proved popular with clients when it comes to prospective returns and potential tax benefits.  

As we always say though, when it comes to considering any investments, common sense is the best approach to take as the value of any investment can go down as well as up.   

 

The content contained in this blog represents the opinions of Equilibrium investment management team. The commentary in this blog in no way constitutes a solicitation of investment advice. It should not be relied upon in making investment decisions and is intended solely for the entertainment of the reader.