With savings rates in free fall, filtering some of your cash into
shares may help boost your returns.
Following five consecutive cuts to the base rate, interest on savings accounts has fallen by up to 75%, with a quarter of all variable rate accounts now paying 0.1% or less.
By contrast, equity markets are currently priced at the lowest levels for several years, providing a great opportunity to improve the long term value of your nest egg.
And best of all you can do it tax-free by making use of a
stock market ISA.
Try and avoid high risk
Of course, the key benefit of a
savings account is that your money is guaranteed, while in shares you could end up losing a large chunk of your cash.
Therefore it is a good idea to avoid any high risk investments, especially if you are new to trading.
So what constitutes a high risk investment? Well that varies, but generally speaking small companies tend to prove volatile and should probably be avoided –
especially in 2009.
By contrast, big blue-chip companies with lots of cash are less likely to suffer from the credit crunch and are thus a safer bet.
Be wary of finance sector
If there's one thing that has become patently clear in these volatile times, its that big companies are not guaranteed to be safe, and nowhere is this more evident than in the banking sector.
While the potential for quick
profit is there - shares in Barclays rose 7% this morning alone – they certainly aren't ideal for low risk investors, explains The Share Centre investment advisor Nick Raynor.
"Although buying low price shares can be tempting, we suggest those new to
investing play the long game and invest elsewhere.”
"We still remain cautious about the banking sector and as such are advising high risk investors to hold their Barclays shares at present, while low-to-medium risk investors should consider selling to recoup some equity.
