Knowing where to put your money at the moment isn’t easy.
Everything looks risky. The stock market is erratic, property prices are shaky and inflation has outpaced every single savings rate for almost two and half years.
Annual house prices are down 3.8 per cent, according to Nationwide’s latest index, the biggest drop in 14 years.
The FTSE 100 index is down 3.5 per cent over the past 12 months.
We spoke with six experts across savings, investing and property and asked where they would put their money for the next five years
Savers are at least benefitting from decent interest rates again. The best easy-access deals pay close to 5 per cent, while the best fixed rate savings deals pay just above 6 per cent.
However, with inflation running at 6.8 per cent in the 12 months to July, the purchasing power of savings is still losing value in real terms.
Read our guide to the best inflation-fighting savings rates here.
The idea of investing in gold often comes to the fore during times such these – with its proponents arguing it is a safe haven, a long-term store of value and can help combat inflation.
However, there is no guarantee the gold price will go up. For example, between the 1980s and early 2000s, the gold price remained fairly flat.
In fact, someone buying and selling gold during that time would have stood a good chance of seeing the value of their investment fall in nominal and real terms.
Those taking a long-term view can at least feel more confident that investing in the stock market or buying a property should ultimately pay off over time, but whether it is a good idea depends on how long a time horizon they have.
We spoke with a number of experts across the savings, investing and property sectors and asked where they would put their money for the next five years, if they could only choose one thing.
The options were a fixed rate savings account paying between 5 per cent and 6 per cent, the stock market, gold, or property.
Alternatively, they were told they could also adopt a ‘wait and see’ approach and opt for an easy-access savings account.
Where would you put your money for the next five years?
David Henry, investment manager at Quilter Cheviot, says: This is easy. I would choose stocks.
Going back to 1985, over five-year rolling time periods stocks have beaten cash returns 74 per cent of the time – those are compelling odds.
I think most people would be surprised that stocks have outperformed property historically, but they have.
David Henry, investment manager at Quilter Cheviot, says he would choose to invest in stocks
In my view a lot of people think of property as being a very successful investment due to two reasons.
Firstly, mortgage debt taken out against the property amplifies the returns that people have seen on property, and second, people tend to value property infrequently and therefore it is likely that when they do, the value has gone up.
With interest rates over the next five years very likely to be higher than we became accustomed to in the post financial crisis world, there are some more headwinds for property as an asset class to negotiate moving forwards as well.
Gold is a great diversifying asset within a portfolio. It tends to dance to its own drum, but is not a serious core asset for accumulating wealth in my opinion.
Again, global stocks have destroyed gold in performance terms over history. Gold also tends to do well in times of fear and despair when people clamour for safety.
I prefer to invest in human progress, and the long term performance of global stocks is testament to the human ability to solve problems – and in the process, create wealth.
Rob Bence, co-founder of property advice website Property Hub, and investment platform Portfolio, says: I would choose property investment, and I have been actively investing in it this year.
Although property prices have experienced a slight dip over the last 12 months, rents have risen, and I can use a mortgage to enhance my returns.
Additionally, inflation is currently eroding that debt at a rapid rate.
Rob Bence, co-founder of Property Hub and Portfolio says he is still actively investing in property this year
James Blower, founder of savings website, The Savings Guru says: Fixed rate bonds are the best option at present in my opinion – they are overpriced, and 6 per cent for a risk free return is an excellent return by historic standards.
People should keep enough money back in easy access savings to have an emergency contingency, but I expect money that can be locked away will perform best in fixed savings over the next couple of years because they’re going to be tough years for many people.
James Blower says fixed rate savings are the best option for the next five years, in his opinion
Andrew Hagger, personal finance expert and founder of MoneyComms says: If I had to choose where to put my money for the next five years I think I’d opt for a fixed rate bond paying between 5 per cent and 6 per cent.
It’s a safe bet and with inflation expected to fall back in the coming months they may even deliver a real net return come next year.
Andrew Hagger, personal finance expert and founder of MoneyComms says he would also opt for fixed rate savings if taking a five year time horizon
Sarah Coles, head of personal finance at Hargreaves Lansdown says: Personally, I have strong cash holdings to cover emergencies and for planned expenditure over the next five years, so I would invest into a diverse portfolio using funds.
If I had no emergency fund I’d have chosen to save into an easy-access account; if I needed a specific sum in exactly five years’ time and no other resources, I might opt for fixed rate savings.
The one thing I wouldn’t do is hang on in an asset that didn’t suit me, just in case something else got better in the interim.
Sarah Coles, head of personal finance at Hargreaves Lansdown, says she would invest into a diverse portfolio using funds
Charlie Lamdin, founder of property website BestAgent says: I would choose gold or silver to put my money in.
Six per cent savings rates will be canceled out by inflation. I expect a major stock market correction within the next three to five years, as growing corporate debts become unmanageable.
The ‘property investment party’ of the last 40 years is over. Unless you’re in the business of renovating property, or being a cash-buying professional landlord, which is a business, not an investment, then I don’t see attractive returns from the property market any longer.
Charlie Lamdin, founder of BestAgent, would choose gold or silver
