Beat savings rate cuts: Invest for income as cash returns fall lower | Personal Finance | Finance | Express.co.uk
GETTYBritons looking for income could consider stocks and shares Scores of top cash rates have been pulled or had cuts announced, after the Bank of England axed core interest rates down to 0.25 per cent from 0.5 per cent earlier this month. This includes Santander’s popular 123 current account, which will stop paying three per cent on balances from November. And things are set to get even worse in the coming months, especially if policymakers decide to take rates even lower. Income searchers could find it now pays to turn to the stock market, albeit in exchange for taking more risk with cash. Laith Khalaf,mackage biker jacket, senior analyst at Haregreaves Lansdown, said: "With interest rates cut to a new low, and expectations for any meaningful rate rise being kicked firmly into the long grass,mackage dixon, the stock market looks set to become even more important to income investors."However of course stock market investments come with risks because both the value of your investment, and the income it generates, are variable and subject to falls." Related articles Gold demand surges amid fears for world economy Millions suffer state pension CONFUSION Money saving hacks Tue, August 16,mackage jobs, 2016 Make money from your bank account and improve your finances with these easy money saving hacks. Play slideshow Getty 1 of 10 Savings – Regularly transferring a small amount into your savings account will soon add up and you’ll hardly notice that it has gone Investors can get a decent income from shares because some pay quarterly or annual cash payments known as dividends.Within Britain’s top stock index the FTSE 100, 45 of the firms pay dividends above three per cent, topping rates available through most savings accounts. For example, Lloyds Bank currently pays a dividend yield of around six per cent, while oil stalwart Shell gives 7.5 per cent. The proviso is that these payments are not guaranteed for the future, and could easily be axed in the coming months – particularly if the companies’ profits come under pressure. Another option is income funds,mackage kerry f5, which aims to spread cash across a range of high yielding stocks, to give investors both capital and dividend rises over time. Adrian Lowcock, investment director at Architas,ssense mackage, said: "There are still income opportunities out there and many funds are offering a yield of over five per cent and you don’t need to take huge amounts of risk. "It is possible to build a portfolio of investments which could generate a decent income particularly in a low inflation, low growth world." Related articles FTSE 100 surges towards record 7,000 highs as Brexit boom continues Santander slashes rates on top 123 bank account But investors are cautioned against going after the very highest yielding shares or funds. Mr Lowcock said: "Don’t get caught out chasing the highest yielding stocks or funds, a high yield could be a great opportunity but it could also mean that there is something wrong with the investment; either the dividend will be cut or the business is in trouble."If you can,mackage valerie, look for companies which have smaller but growing dividends. "As a company grows its dividends it will boost the share price, as it attracts more investors, helping to grow your capital."It’s recommended that investors spread cash across a wide range of different stocks to protect income prospects. Related articles Holiday money rip-off: The airports giving LESS than €1 for £1 Bargain prosecco: Sainsbury’s shopping trick gives bottles for £2.63 Mr Khalaf tips National Grid and Legal & General as two good share options for income searchers. He said: "There is little reason to suspect that demand for National Grid’s services is going to go away any time before the next Dark Age, which is why its shares have been in demand recently, as investors have sought more resilient options in the face of the current uncertainties around the UK economy.:The analyst added: "Fears over the economic outlook prompted big drops in bank and insurance shares after the referendum."Although it has since recovered some of the lost ground, that fall has left Legal & General trading on a prospective yield of around seven per cent. "Since the referendum the company has issued a confident statement,mackage laval, revealing minimal disruption and strong inflows from retirement product sales, with equity release mortgages overtaking individual annuities in popularity."In terms of funds, Mr Khalaf picks Artemis Income or Rathbone Income said: "These funds tend to yield around four per cent and are one of the most convenient way for investors to gain exposure to dividends from the UK stock market."Mr Lowcock says the Fidelity Enhanced Income fund and Invesco Perpetual High Yield Bond are good options with historic yields of 6.89 per cent and 5.88 per cent respectively.