Information: For immediate release Monday 12 July 1999
HARD-EARNED CASH WORKS SO MUCH HARDER IN EQUITY FUNDS
The latest quarterly performance figures show the clear
advantages of investing in funds that have more to offer than
traditional deposit accounts.
Over the medium to long term, the risks associated with stock
market investment diminish. Markets do rise and fall, but
over time the potential rewards more than compensate for any
short term volatility. People seeking income in particular
can benefit from looking beyond the traditional deposit accounts
offered by banks and building societies.
In July 1990 investors could expect to receive £94 for every
£1,000 invested in a deposit account. That amount has now
fallen to £30. However, the figures below show that a similar
investment in equity income or bond funds would have seen
a significant increase in terms of both income and capital
growth. (1999 Quarter 2 figures in bold, 1999 Quarter 1 figures
in brackets).
- Over 10 years to 1 July 1999, the annual income on £1,000
invested in an average UK Equity Income unit trust increased
to £62 (£58) after 10 years. The income from a Corporate
Bond fund rose to £58 (£53); while the savings income on
an average building society deposit account dropped to £30
(£32) in the tenth year, falling from £94 in 1990. [Chart
1]
- The capital invested in an average Corporate Bond fund
in June 1989 had grown by 30% (24%) over the 10 years, compared
to 97% (88%) in an average UK Equity Income fund. [Chart
2]
- A lump sum of £1,000 invested in an average building society
deposit account in June 1989 added £579 (£601) to its value
over 10 years, whilst the investment in an average Corporate
Bond fund more than doubled to £2,211 (£2,134). The equity
income fund grew by 191% (180%) to £2,914 (£2,798) or £3,251
in an equivalent PEP/ISA (£3,137 in a PEP/ISA). [Charts
3/5]
- Over the ten year period to July 1999 average returns
from UK Equity Income funds were similar to those achieved
by UK All Companies and Global Growth funds. After 10 years,
£1,000 invested in the UK Equity Income sector had become
£2,914, compared to £2,659 in the Global Growth sector and
£3,+44 (0)20 in the UK All Companies sector. [Chart 4]
- On regular savings of £50 a month, an equity investment
in a UK All Companies fund outstripped the savings account
deposit after 5 years by £1,342 (£1,149). The difference
increased to £6,606 (£4,836) over 10 years and £19,797 (£12,792)
after 15 years. [Chart 6]
- A £1,000 investment in a UK Equity Income fund was 22%
(9%) higher than an equivalent Managed Life Fund investment
after 5 years but 73% (42%) higher than the average building
society deposit account for the same period. The difference
on a £50 regular savings plan over 5 years was 10% (6.5%)
on the Managed Life Fund and 35% (27%) on a deposit. [Charts
7/8]
- After 15 years, the lump sum investment ran 305% (189%)
ahead of the deposit account and 105% (62%) ahead of the
Managed Life Fund; while the regular savings unit trust/OEIC
plan ended 113% (92%) higher than the deposit and 40% (30%)
higher than the managed life fund. [Charts 7/8]
- After 10 years, £1,000 in an average UK Equity and Bond
Income Fund beat the Retail Price Index by 69% (103%) or
91% (111%) in a PEP/ISA. The deposit was 10% (9%) ahead
of the Retail Prices Index. [Chart 9]
- £1,000 invested in an average fund in the following sectors
over ten years, would have achieved returns of more than
£3,000 – UK All Companies, UK Equity & Bond, Europe ex UK,
Europe inc UK, Global Specialist, North America and North
America Specialist.
- A £50 per month regular savings plan over ten years, would
have achieved returns of more than £12,000 in the average
funds of the following sectors – UK All Companies, UK Equity
& Bond, Europe ex UK, Europe inc UK, European Specialist,
North America, North America Specialist, UK Equity Income.
[Chart 10]
For further information please contact:
Anne McMeehan, Director of Communications -
AUTIF - 0171 831 0898
Michael Quach, Head of Statistics - AUTIF -0171 831 0898
Clare Arber, PR Manager - AUTIF - 0171 831 0898
Susie Poote, Communications Assistant - AUTIF - 0171 831 0898
Please click to view
the attached PDF file
Attachment 1 - Charts 1 to 9
Please click to view
the attached PDF file
Attachment 2 - Chart 10
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