Where to put £1,000 in a world of negative interest rates
You could buy shares, gold, even a classic car … but don’t put your money under the mattress!
Many UK banks are making plans for the banking industry by changing the terms and conditions on its accounts to pave the way to charge customers for holding their deposits, although they insist they have no immediate plans to do so. In an upside-down world where interest rates turn negative and you could end up paying a bank to lend them your money, what are the alternatives?
1. Under the mattress
If you know for certain your bank is going to give you back less than you put into an account, then why leave it there?
Why not stash it under the mattress? True, your £1,000 will still be there year after year, BUT, inflation means it will not hold the same purchasing power after a only a couple of years.
REASONS NOT TO: If you hold cash in your house, most insurance policies will pay you back just £500 if you suffer a fire or burglary.
It’s almost every Brit’s favourite investment. Trouble is, £1,000 won’t get you far. The typical deposit an investor now
has to put down for a buy-to-let property is around £55,000. If you have just £1,000, the boring but sensible option in a
world of zero interest rates is to use the money to pay down your mortgage.
REASONS NOT TO: Unless your mortgage is very small and it will reduce the capital owing considerably, £1,000 is not going to save you a huge amount of interest over the period of the mortgage.
Dividends from some of the worlds biggest companies can look very attractive compared to the prospect of zero interest rates on savings accounts. Buy shares today and, so long as the company maintains its dividend, you will receive an income from the shares.
REASONS NOT TO: The risks are high; BP used to be the biggest dividend payer in Britain until the Deepwater Horizon disaster wiped out much of its profits. You are relying on a company to stay in business AND make a profit AND pay dividends.
If you believe the hype, these have been sensational places to put your money. Your £1,000 would stretch to a just one-third of a single bottle of Chateau Lafite Rothschild 1982 vintage. If you had bought it in 2000 and sold it in 2010 you would have made a profit of 1,137%. But, wine has fallen out of favour; buyers who snapped up 2010 Lafite Rothschilds have lost around half of their money since then.
REASONS NOT TO: Huge risk, you on relying on people wanting and placing value on the objects you have!
Everytime there is a major event in the world, the price of gold rises. Averaging at 12% in GBP over the last 15 years, You are not investing your £1,000 in gold – investments are risky and potentially have losses – you are exchanging your pieces of paper, fiat currency for REAL money. What do you think banks do with the money you give them? Yes, they buy gold, earn a nice return on it and give you 0.01% back!!
REASONS NOT TO: If you want a fast return on your money
REASONS TO: The list is long, but safe to say your gold is in an appreciating asset that has a limited supply and cannot be copied. 1oz of gold today could buy you a very nice hand tailored suit and possibly hand made leather shoes, 2,000 years ago, 1oz of gold would have paid for a Roman senators toga – you see?
Of course with Karatbars, you now also have the opportunity to acquire gold AND be part of a new ICO!! It’s a win win situation!
Alan Butler, VIP Business Partner
Alan is married to Heidi and has four children. He has been a Karatbars Affiliate since 2016, and has over 130 partners and customers in his Karatbars business.