UK interest rates have been low for some years now, but the pandemic has suppressed them even further. The government is racking up debt to quell the tide of Covid-19. This may well lead to inflation in coming years, but for now, there’s talk of the close-to-zero interest rates turning negative. This means saving spare money in a Cash ISA or bank account is not a way to build wealth for the future. Stock market investing offers an alternative solution, and the time could be right for savvy investors like me to make future millions.
I’d become a business ‘owner’
Investing differs from saving because it involves putting my money to work in something investors believe will increase in value over time. This includes buying shares of companies, investment funds, property, gold or even Bitcoin. There are many ways to put my money to work other than leaving it in a low interest savings account, some of which are riskier than others. My favourite is the stock market.
When I think of the stock market, I see an opportunity to own parts of the businesses I most admire. The London Stock Exchange lists over 500 companies and many of them I’d steer clear of, but we all know of big-name companies that have been around for many years and are likely to be here far into the future. These are the companies I’m interested in owning. Tate & Lyle, Coca–Cola HBC, Rentokil and AstraZeneca are all companies I think will still be standing in 10 years’ time.
The beauty of stock market investing is that it can make millionaires of ordinary people. This is helped by the fact that many stocks also come with dividends, which are payments the owner receives each year. These can be reinvested, which contributes to the compound interest phenomenon of building wealth. It equates to earning interest, which then earns interest on the interest, building up substantially over time.
Stock market investing
It’s easy to get started in investing in the stock market. I’d choose a broker such as Hargreaves Lansdown, Interactive Investor or AJ Bell and open a Stocks and Shares ISA or Self-Invested Personal Pension (SIPP). From there it’s simple to buy shares in publicly listed businesses from the FTSE 100, FTSE 250 and many foreign companies too, including US favourites such as Tesla, Apple and Facebook.
I can then choose to automate the process by buying into funds or making a regular investment in specific stocks. Alternatively, I can opt to be more hands on. I could take a proactive approach to my investments by researching and choosing companies I like for their fundamentals. This includes how much debt they have, if they offer dividends, whether they have an advantage over competitors and how well managed the company appears to be. It sounds daunting to begin with, but it can be a fascinating pastime and a thrilling way to build wealth.
The pandemic has created uncertainty for many companies, knocking their stock values to bargain basement prices. When a vaccine comes into play, I think the stock market will rally. That means many of these cheap stocks will see their share prices soar. That’s why I think this is a great time to start stock market investing.