# Why standard saving is a zero-sum game: investing made simple
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2017-11-21
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Investing and Trading: How to Make Your Money Work Harder
Meta Description: Discover practical ways to make your money work harder in the face of Brexit challenges. From ISAs to forex trading, explore your investment options now.
Tags: featured
Tag URLs: featured (https://financedigest.com/tag/featured)
URL: https://financedigest.com/why-standard-saving-is-a-zero-sum-game-investing-made-simplehtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd211117-19-1736843217532-compressed.jpg)

**Lee Turay**, Senior Trader, Learn to Trade

The uncertainty over Brexit is already weighing on the UK economy. With inflation at three per cent, the squeeze on living standards has intensified, unhelped by weak wage growth. It’s a serious [challenge facing](https://www.financedigest.com/factbox-the-challenges-automakers-and-now-tesla-face-with-humanoid-robots.html "Factbox-The challenges automakers, and now Tesla, face with humanoid robots") households in Britain. [Food prices](https://www.financedigest.com/world-food-price-index-falls-for-sixth-month-in-sept-fao.html "World food price index falls for sixth month in Sept -FAO") have increased to their highest levels in almost four years and clothing is up by 5.1 per cent. We’ve got to start making our [money work](https://www.financedigest.com/how-does-hard-money-lending-work.html "How Does Hard Money Lending Work?") harder, but how?

Discussing money is a taboo. Despite its centrality to each of our lives, paradoxically we avoid talking about the specifics of salaries, savings and pensions. The problem starts at school: [money literacy and investment](https://www.financedigest.com/8-best-passive-investing-ideas-which-can-help-you-make-money-in-2022.html "8 Best Passive Investing Ideas Which Can Help You Make Money In 2022") options are missing from the curriculum entirely – so unless you have savvy friends and family, understanding what is best to do with your money can be a financial jargon minefield. And, with only one in 10 of 35-54 year-olds confident that their savings will see them through retirement, it’s time we started seriously [considering our options](https://www.financedigest.com/cryptoverse-is-bitcoin-out-of-the-woods-consider-the-options.html "Cryptoverse: Is bitcoin out of the woods? Consider the options").

The question is, where and how do you invest?

ISAs

Banks spend considerable budget on marketing themselves as the safe, reputable option for [saving money](https://www.financedigest.com/saving-money-hacks.html "Saving money hacks"). And while this is true, a standard ISA only offers 3 – 4 per cent interest per year, roughly speaking.

Even a [stocks](https://www.financedigest.com/mutual-funds-vs-stocks-which-is-better.html "stocks") and shares ISA that can offer 13-14 per cent per year typically incurs a 6p to every £1 charge. This massively eats away at margins and, when you factor in inflation – [currently at its highest level for half a decade](https://www.financedigest.com/polycaprolactone-market-is-projected-to-expand-at-an-impressive-cagr-of-10-over-the-next-decade-to-be-valued-2-5x-its-current-side-by-2030.html "Polycaprolactone Market Is Projected To Expand At An Impressive CAGR Of 10% Over The Next Decade, To Be Valued 2.5X Its Current Side By 2030") – not only is money not growing, it’s actually decreasing in value. It’s no surprise people are choosing to spend rather than save.

So far, not so promising but there are other options out there. Banks, like many institutions, suffer from apathy and that’s why it’s [essential savers shop around](https://www.financedigest.com/uks-kwarteng-mini-budget-was-essential-in-resetting-debate-around-growth.html "UK’s Kwarteng: Mini budget was essential in resetting debate around growth") to see if they’re getting the most competitive return on their cash.

Investing & Trading

Some of these other options include: investing in bonds, [putting money into managed funds](https://www.financedigest.com/cash-crunch-for-british-funds-puts-regulators-under-pensions-lens.html "Cash crunch for British funds puts regulators under pensions lens"), and directly trading stocks, shares and commodities. If you’re able to put away savings for three years, a fixed [rate bond](https://www.financedigest.com/shares-and-bonds-nervy-as-rate-hike-week-looms.html "Shares and bonds nervy as rate-hike week looms") with NS&I might be worth considering, as it guarantees a 2.2 per cent a year growth bond with no risk but is unfortunately taxable. Premium bonds, while not guaranteed, do offer savers the chance to [win tax-free prizes](https://www.financedigest.com/banking-crisis-breakthroughs-win-nobel-economics-prize-for-bernanke-diamond-dybvig.html "Banking crisis breakthroughs win Nobel economics prize for Bernanke, Diamond, Dybvig") between £25 and £1m.

Directly [trading commodities](https://www.financedigest.com/commodities-trading-houses-help-keep-russian-oil-flowing.html "Commodities trading houses help keep Russian oil flowing") such as gold has paid dividends in the past, but as blockchain technology becomes universal, critics are citing digital currency bitcoin as the next gold. However, savers are warned to tread carefully. There isn’t currently the protection in place if investors were to lose everything – it’s a huge gamble for anyone without a lot of [experience and prior research](https://www.financedigest.com/cellulite-treatment-market-size-is-set-to-experience-revolutionary-growth-by-2026-transparency-market-research.html "Cellulite Treatment Market Size is Set to Experience Revolutionary Growth by 2026 | Transparency Market Research").

As it stands, by far the most lucrative choice – and one that manages the risk – is [forex trading](https://www.financedigest.com/how-to-trade-forex-and-succeed-as-an-individual.html "How to Trade Forex and Succeed as an Individual"), turning over $5.3 trillion annually. Return on investment is typically four per cent per month on average, which equates to roughly a 60 per cent increase on starting balance after one year, completely tax-free.

Starting Portfolio Value £2,000

Portfolio Value after 1 year £3,202.06

Portfolio Value after 2 years £5,126.61

Portfolio Value after 3 years £8,207.87

Portfolio Value after 4 years £13,141.06

Portfolio Value after 5 years £21,039.25

Figure 1 demonstrates what is known as compounding – i.e. generating earnings on previous earnings. Let’s imagine you open a trading account with £2000, this is a breakdown of your portfolio based on a realistic per cent return (four per cent) per month. After five years, that equates to over £21,000 – more than ten times the original investment.

Typically, this line of interest doesn’t play out in full because once it becomes your secondary, or even primary, income, it will be spent on a new car, bills, holidays, etc. However, it gives you a good sense of how [profitable forex](https://www.financedigest.com/forex-trading-how-to-trade-currencies-for-profit.html "Forex Trading: How to Trade Currencies for Profit") can be.

In comparison, this is what that same £2,000 investment looks like in the standard savings [account many people are currently](https://www.financedigest.com/coffee-current-accounts-and-the-commoditisation-conundrum.html "Coffee, current accounts and the commoditisation conundrum") using at 1.0%:

Starting portfolio value £2,000

Value after 1 year £2,020

Value after 2 years £2,040.20

Value after 3 years £2,060.60

Value after 4 years £2,081.21

Value after 5 years £2,102.02

After five years, it has grown by just over £100. This equates to a 5.101 per cent increase over five years, hugely disproportionate with the [soaring cost](https://www.financedigest.com/uk-car-output-rises-in-august-soaring-costs-cast-shadow-over-recovery.html "UK car output rises in August, soaring costs cast shadow over recovery") of living: the price of fish has risen by 9.6 per cent, coffee by 5.1 per cent, and electricity by 9 per cent this year alone.

What are you waiting for?

Though it’s hard to argue with the returns above, there is always risk involved which we, as humans, are inherently opposed to. However, there is never [reward without a little risk](https://www.financedigest.com/the-risks-and-rewards-of-investing-in-venture-capital.html "The Risks and Rewards of Investing in Venture Capital"). Yes, savings, ISAs and even pensions are low-to-no risk, but they offer a very small ROI or, as we’ve pointed out, none at all.

While trading does demand a disciplined mindset, as long as you stick to some simple rules you can [largely mitigate risk and start to see](https://www.financedigest.com/global-equity-funds-see-large-outflows-on-slowdown-worries.html "Global equity funds see large outflows on slowdown worries") consistent returns. That is why Learn To Trade imposes a maximum two per cent investment stake, so that traders can’t lose everything in one fell swoop. But no matter which platform you’re trading on – particularly if you’re a beginner – we strongly recommend putting similar parameters in place.

Remember, [money is an important](https://www.financedigest.com/how-to-save-money-on-important-documents.html "How to Save Money on Important Documents") and complex topic – that’s why it’s vital you constantly evaluate all options to ensure you’re making the most of it.


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---