How should you invest the new £1 coin?

Have you seen any of the new twelve-sided £1 coins yet? They were entered into circulation earlier this week and are already selling for many times their value on eBay.

£1 won’t get you very close to buying a house (or even 100 ‘penny’ sweets anymore), but I thought it would be interesting to look back to 1983 as to how those first getting their hands on the, now discontinued, ‘round pound’ coin could have fared.

Those ‘saving’ their newly minted 1983 £1 coins in their piggy banks would now be breaking open their innocent animal friend to find inflation since 1983 had corroded its buying power to the equivalent of 32p!

Let’s see how investing those £1 coins could have made a difference to someone’s wealth…

Of course you’d have to go back several centuries to be able to buy the average house in the UK for £1. Today the UK average home costs £205,937, which is a 683% increase from the average cost in 1983 (£26,307).

That is a very similar return that you would have received had you invested your shiny new currency in the stock market in 1983. The FTSE 100 was benchmarked at 1000 in 1984, but is up 632% since, to stand at 7320 as I type.

Some might even have exchanged 226 of their newly minted pound coins in 1983 for a one ounce coin of pure gold. If they had, that gold coin would now have a value of £1,004; equating to a return of 344%.

None of these investments consider that you could have re-invested your returns to compound your growth. Nor do they factor in potential rental income from property, or dividends from shares.

And whilst property comes out on top (further beating the returns a savings account or government bonds would have provided), these figures also don’t factor in that whilst investments in most asset classes require all of your own money to be used, property is one of the only ones whereby you can leverage your returns by borrowing money from the bank. Those that had done that would have turbo charged their already top performing investment many times over.

What seems obvious to me though is that (unless you can get someone to pay you more than £1 for it now) keeping hold of the new £1 coins in your piggy bank won’t prove to be a smart investment by the time they next reinvent the coin.

If you’re considering investing in property (hopefully with more than one pound!) and would like to learn a little about how you could do so in residential buy-to-let, please contact me for a free consultation.

 (This article was featured in the Chichester Observer's property section on 30th March 2017) 

Clive Janes, CRJ Lettings.


www.crjlettings.co.uk

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