Fixed interest investments These are investments where the income is a fixed amount, at least for the time being. Usually the capital value is also fixed, although in some cases it can change, too. However, either income or capital are fixed and in many cases both.Equities These are investments in ordinary shares of companies, where both the income and the capital can vary up or down. They can be bought and sold on a stock exchange and they participate in profits (after any preference dividend is paid) and receive dividends, usually paid half yearly. Shares have a par value – usually 1 or 50p – but this bears no relationship to their market value and can be ignored.Fixed interest versus equities All statistics show that in the long run, due to capital growth, equities beat fixed interest by a big margin, wherea fiat currency s fixed interest may not even beat inflation Here is another comparison. If you invested 1,000 in 1973, 20 years later, in 1993, it would have grown to: - building society (average) 43,000 - shares (FTSE 100) 297,000 Even after allowing for inflation, the equity investment would have risen to 56,000, whereas the building society would not have kept pace with inflation and would have fallen to 8,700. Although the income on equities is less than on fixed interest to start with, it catches up and passes it in the long run. Over the past 30 years or so, income from equities has on average doubled every seven years But to achieve the best returns on equities it is necessary to have flexibility in the timing of both buying and selling and an ability to remain invested for the long term say five years at least.
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