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Recent investigations of money.co.uk shows that, in 2024, the average UK savings account has £17,365. Invested astutely, such a sum can generate significant passive income on its own.
The problem is that great passive income rarely comes from standard savings accounts. For much of the last decade, this type of account could return one or two percent a year. I have seen cash ISAs offering as little as 0.25%. That's just not going to be enough.
Lucrative nature
My preferred method to increase savings is the stock market. He London Stock Exchange offers access to thousands of businesses that anyone can buy even with just a few pounds up front. All of these companies also have the goal of increasing the value of their shares.
Of course, the lucrative nature of stocks and shares is no secret. Every year billions of pounds are paid in dividends and record profits from giants such as Shell either tesco They are rarely far from the news headlines.
The question is not so much: “Do people make money in the stock market?” Rather it's more about “How do you make money in the stock market?” The tricky part is choosing the right horses to back.
With those thousands of companies listed in London and many more around the world, it is worth narrowing down the options with a suitable requirement.
One requirement is the '10-bagger'. This phrase was coined by billionaire investor Peter Lynch and refers to a company whose stock price has risen 10 times.
10 times
NVIDIA It's an example that most people will know. In May 2020, shares were worth less than $88 each. Today, shares change hands for $887. This represents a more than tenfold increase in just a few years. Therefore, Nvidia is one of these 10-baggers.
And while American technology has had some fantastic years, we don't need to focus on computers or even the US to find 10 bags. These companies exist closer to home.
The well-known name of Rolls-Royce (LSE: RR) achieved the feat not long ago. The shares were below 42p in October 2020. They are now up to 428p. That's another 10 returns for another 10 baggers.
I still own Rolls-Royce shares and like the future of the company. While I don't see another 10x return coming quickly (the pandemic year of 2020 made many travel-adjacent stocks unusually cheap), I think this could be one of the best ones. FTSE 100 companies to own.
Rolls maintains an entrenched position in an industry with high barriers to entry. The average qualified engineer is not likely to go out and do a new start-up building engines very easily. This gives Rolls a lot of security against the competition.
Airbus launched its A350 wide-body aircraft in 2015. Is Rolls-Royce one of the engine manufacturers that can produce engines for these new aircraft?
Well yes, because it is the only company whose engines work. The A350 aircraft operates exclusively with Rolls-Royce Trent XWB engines.
One drawback is the price. Rolls-Royce trades at around 29 times forward earnings, one of the highest on the FTSE 100.
I am buying?
Still, I hope the future is bright for this British company. The only reason I don't buy more is because my position is already big enough!
