Build yourself a brighter financial future

It’s frightening how much of people’s savings is just lying around doing nothing.

Why is this frightening? Because if you want a comfortable retirement for you and your family, you really need to make sure that your money is actively working for you – not just ‘sitting under the mattress’.

According to the UK Investment Association there’s £200 billion currently held in cash ISAs. With today’s low interest rates, this money is earning virtually nothing and in many cases, is actually losing value. It’s also claimed that there’s twice this amount – £400 billion – lying around in underperforming ‘dog funds’. This is such a huge waste. And if your money is in a cash ISA or a useless dog fund, you really need to consider how much this is costing you. It could be tens of thousands of pounds.

You have done the difficult bit, which is to save this nest-egg and place it into an ISA protecting it from future tax demands. Then you have sat on your hands and not done the easy bit, which is making it grow in a safe and sensible fashion, whilst allowing compound interest to work its magic.

Let’s say you have £25,000 in savings. Just look at the difference in returns over the next 5 – 20 years, depending on whether you put that money in a cash ISA or invest it conservatively in the stock market.

A cash ISA might give you 1.5% interest. A conservative stock market investment could give you a 7% return, and in this example, I’ve then deducted £300 p.a. for costs. Here’s the startling difference in results:

1.5% return.
Stock market
7% and £300 p.a. costs.
5 years £26,930 £33,340 £6,410
5 years £26,930 £33,340 £6,410
10 years £29,010 £45,030 £16,020
15 years £31,260 £61,440 £30,180
20 years £33,670 £84,400 £50,730

As you can see, even after just 5 years the stock market strategy is ahead by over £6,000. And if you keep the stock market strategy going for 20 years, you’ll be up over £50,000 and your savings pot would be more than double what you would have got from a cash ISA. That’s an enormous difference. And if you want to maintain your lifestyle in retirement, whether that’s going to the golf club, enjoying holidays, or simply living comfortably and leaving an inheritance, then now is the time to take charge.

Please bear in mind that the financial industry is not really motivated to help you out. Why? Because they earn their fees, year in, year out, whether your wealth increases or not. Your savings pot is ‘your baby’ and no-one else’s, and it’s in your hands to turn the situation around.

Many people quite wrongly liken stock-market investing to going to the races. They say that “when they follow the horses, the horses that they follow, also follow the horses” and they are put-off. That however does not have to be the case. Remember that it is not wise to ask for advice and directions from somebody who has not been where you want to go, and this applies to aspirations for your savings as much as it does to seeking road directions. Please look at the graph below and you will see that the cautious Saltydog Tugboat portfolio has by and large avoided the five major stock-market falls over the last six years, and yet still produces an average annual return of around 7%.


Not everybody will have the ability and temperament to run their own investment portfolio, but there are many more that can, than think they can. Today, DIY investing is possible for anybody with a computer and access to the internet. The arrival of fund-supermarkets has made it cheap, quick and easy. To be successful you need continuous up-to-date accurate information, and it is vital that decisions should not be based on rumour, speculation and hearsay.

The Saltydog Investor was developed to assist people in making these initial steps. We are enthusiastic advocates of active fund momentum investing, and issue weekly unbiased performance numbers to use for decision making. We invest in funds, and advocate that investment decisions should be based on selecting the Investment Association sector first and the fund second. When a sector is performing well, like a rising tide it will float all the funds in that sector. Momentum, like compound interest, has energy and strength to produce the growth that we are looking to achieve.

And why do we use funds? There are a number of good reasons.

A fund collects the money of many individuals and invests it into many companies within its sector – thus giving you helpful diversification. In other words, your eggs are not all in one basket, as they would be if you only bought one company share. In addition, a fund will be run by a professional  manager, usually with a team of researchers who have the time and skills to select and monitor the fund’s assets. Funds are also highly regulated, ensuring that your money is protected from any financial misfortune which may happen to the organisation that is running the fund.