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Investing in the stock market can be risky. But it can also yield big rewards for investors who are patient and careful.
Instead of keeping my money in a savings account, I’m buying stocks in companies. Instead of receiving interest, I seek a return on the company’s earnings.
Returns
At the moment, the best savings account I can find pays 3% interest per year. The rate is variable, so it could go up or down, but that’s the way it is right now.
If you invested £100 a month at 3% interest per year, you would have £58,519 after 30 years. Clearly, you would have made money, but I think you could do better in the stock market.
During the last decade, the FTSE 100 has returned an average of just over 7% per year. That’s significantly more than you could earn on a checking account right now.
Investing £100 each month at a 7% annual return would result in an investment of £117,750. But the real difference comes in the income that each would generate.
In passive income terms, the 3% savings account would generate £1708 per year after 30 years. The 7% portfolio would be paying me £7,660.
Investing in the stock market offers much better returns than a savings account for a long-term investor. But I think I can do even better by looking at individual stocks.
shares to buy
Rising interest rates have been weighing on stock prices for the past year or so. But that means there are great investment opportunities for me right now.
actions in Halma, for example, have fallen by around 19% in the last 12 months. A share of the company’s profits would cost me £21 today, compared to £26 a year ago.
Also, Halma’s business is growing. Over the past year, the company’s revenue grew 15% and earnings per share increased 20%.
Outside of the FTSE 100, there are other UK stocks that I think are attractive at the moment. Diploma It’s another stock I’ve been buying for my portfolio.
Diploma’s share price is down just 3% compared to a year ago. But your latest trading update indicates that the underlying business is doing well.
He FTSE 250 company increased its revenue by 30% and its earnings per share increased by 26%. I think that’s impressive.
my investment plan
Savings, index investing, and buying stocks are all ways you might look to generate passive income. And I could start any of them right now.
I think there are some great opportunities in the stock market right now. That’s why I’m looking to invest my money there.
Investing in business should, I believe, allow me to build my wealth more effectively. And with 30 years to invest, the little differences can really add up.
I will look to put some of my money in savings for emergencies. But for passive income, the kind of return that the stock market offers is much more attractive to me.
