Investors flock back to stock market

Since the rates on the cash deposits have plumed, investors seem to be flocking back to the stock market, which looks like a great opportunity for income-seekers, but they may not take the profit they may make for granted.

Nearly half of the investors who have invested in ISAS have already shared their £7,200 allowance this tax year. More than a quarter of them plan to increase their exposure to equities due to falling cash interest rates.

The investment Isa accounts jumped to 67% this season, compared to last. 63% of the surveyed investors had been persuaded that the shares will generate the best results in 2009.
Head of investment strategy at Barclays Stockbrokers, Barbara-Ann King, claimed that people seem to be benefitting the low interest rates. Informed investors are taking advantage of the potential long-term returns from their investments.

The interest rates have been low all over the world these last few months. The Bank of England cut the official interest rates to an all-time low last week, they are now just 0.5%. This was the sixth consecutive rate cut since October 2009, when it started dropping from 5%.

Savers have been shunning cash to chase more profit on their deposit accounts. In January they managed to pull a sloppy £2.3 billion out.

With ISAs, you are able to invest your money in a riskless way, unlike the value of stocks and shares, which can rise and fall. An other way is to invest in corporate bonds or hold the funds in cash in the ISA wrapper, so you can wait until you think it’s gotten safer to invest.

However, the “safe havens” aren’t as low risk as they might seem. Investors in corporate bonds and equity income funds have proven to have underestimated the risks of these investments.

Most people don’t manage to invest their money the way they actually want it to be. Stocks and shares ISAs are proving popular as an alternative to miserly savings accounts. In these times, those who invest it in a riskless way often gain profits of les than 0.5%. I still think the best way to gain profits is to invest on the stock markets, and to take advantage of this current situation.

But of course, everyone has got savings, and not everyone wants to take risks and buy shares on the stock market. Therefore the ISA accounts are a great way of saving your money. It doesn’t make as much profit as you could make elsewhere, but you have no risks at all, which seems to be quite popular in times like these.

Source: http://www.timesonline.co.uk/tol/money/investment/article5874619.ece
Written by Tom Baeyens,
Student at Artevelde College
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