When it comes to the long-term growth of your money, it is usually better to be on the stock market than to get out.
I can sometimes complain about bad returns, but even with a few weak investments I made more money in the past ten years than I had been given by leaving money in a bank savings account.
Do not take my word. Barclays has tracked the return on a series of investments over the past 118 years and publishes the results in an annual Equity Gilt study.
The latter shows that shares in that time spent 91% of the ten-year periods better than cash.
Barclays data registered in the past 118 years show that equities spent 91% of the 10-year periods better than cash in that time
The easiest way to get a foretaste of the stock market is through tracker investments – simply following a stock market index up or down.
Even for advanced investors, they can form the core of a larger portfolio.
Curiously, they are very unpopular with some financial advisors and investment managers. Even their alternative name – passive funds – is humiliating in one way or another, compared to the muscular description of active & # 39; funds.
But I am a fan and that is what you have to be. Trackers can be incredibly cheap as long as you choose carefully. They have put pressure on all fund managers to cut costs – and although you can not predict the stock market, you can control your costs.
Crucial for them with a busy life is that they offer a fairly easy way to have money on the stock market. I currently have two, but I have had more.
Vanguard & # 39; s FTSE UK All Share costs me only 0.08 percent per year. HSBC FTSE 250 – which invests in shares of medium-sized companies – is a little more at 0.18 percent.
My trackers are based in the UK, but you can follow a basket of global equities, the price of gold, bond prices or other commodities.
Trackers are stupid, show no initiative, will not perform better than a good market or valorize a falling – something to be reckoned with, because markets look more and more nervous. But there is no guarantee that an actively managed fund will do the same.
Investment giant Vanguard has analyzed active versus passive funds in good and bad markets – so-called bull and bear runs.
The survey shows that in the dotcom bubble until 2000, just over half of the active funds beat the stock market, but in the subsequent bear market up to 2003 and the rising market until 2007 around four in ten defeated the market.
Trackers have put all fund managers under pressure to cut costs – and although you can not predict the stock market, you can manage your costs
Slightly more than half beat the market around the financial crisis of 2008, but since then we are back to 43 percent better.
A policy document published by investment manager Royal London today shows that from 2012 to 2015, the majority of actively managed funds investing in the UK were passively defeated over three years.
But more recently, only 2 percent of active funds have beat their benchmark for each of the three consecutive years.
Steve Webb, policy director, says: "Activists must earn their money, especially after costs. But we think there are certain markets or specific points in the cycle, such as when the index falls, when active management can yield better results. & # 39;
Financial advisor Nic Round, from health.coach, states that it is important that investors are on the market while keeping the costs they pay low and have a clear strategy for what they are trying to achieve.
The most important thing is to really think about strategy and then buy investment products that can be done almost on a do-it-yourself basis. & # 39;
Never let anyone play down the effect of indictments. Suppose you have saved £ 200 a month for 30 years and your money has grown by 6 percent per year.
If you paid 0.1 percent annual fees, you would receive around £ 192,330. But 1.5 percent reimbursements would lower your yield to just over £ 150,000 – £ 42,330 less.
Here is another example. Let's say you retire with a £ 200,000 piggy bank.
In the next 15 years your money could grow to almost £ 473,000 with an annual fee of 0.1 percent and a growth of 6 percent.
Save the costs up to 1.5 percent and your pot would be slightly lower than £ 387,000 – £ 86,000 less due to costs.
These figures assume that you do not hit the money!
Vanguard has its own platform, allowing investors to buy and hold their funds for an annual fee of 0.15 percent, with a maximum of £ 375 per year. The funds cost 0.06 percent to 0.8 percent per year on top.
Blackrock is another big player in the tracker and passive market. You can buy its funds, with rock-bottom charges & # 39 ;, on any investment platform, such as A.J. Bell, Hargreaves Lansdown or Fidelity. There are many cheap trackers of fund houses such as Fidelity and M & G.
It is important to realize that an all-share tracker is not a guarantee of diversity – some companies are so large that they dominate the index.
Slightly more than a quarter of Vanguard's FTSE All-Share tracker is invested in five companies: HSBC, Royal Dutch Shell, BP, BAT and GlaxoSmithKline.
That is one reason why I have a tracker specifically for covering smaller companies.
There will always be fund managers who do better – some even do it consistently. But as a core investment, trackers have much to their advantage.