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The Importance Of Reinvestment Of Income From Shares And Gilts

05/03/19 Wealth Management

The Barclays Equity Gilt Study* (April 2019) provides some powerful insight into the importance of reinvestment of income from shares and Gilts.

Income from Shares (Equities) and/or Gilts (UK Government Bonds) may be withdrawn or reinvested. According to the Barclays Equity Study, £100 invested in Equities in 1945 would be worth £5,573 in real terms today (after taking account of inflation)if all gross dividends had been reinvested.If the dividends had been consistently withdrawn in full over the same term the £100 invested would be worth £244 in real terms today. Quite a difference!

An investment of £100 in Gilts in 1945 would be worth £231 today in real terms if income had been reinvested. If the interest had been withdrawn the £100 would be worth £1.75 in real terms today.

Putting the above figures into perspective without taking account of inflation (the nominal return) £100 invested in equities at the end of 1945 would have a cash value of £217,045 at the end of 2018 (source of figures Barclays Equity Gilt Study 2019).

If you have chosen a flexi-pension drawdown arrangement as your retirement option or intend to take income from an investment portfolio, the above figures illustrate the value in leaving the capital sum intact and reinvesting the income for as long as practical. 

If you are trying to decide if pension drawdown is the right retirement option for you or you want advice on taking income from an investment portfolio we will be happy to help. Call us on 0800 043 8341 or complete the form below to request a call back. 

The Barclays Equity Gilt Study

This blog is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investment or course of action. The past is not a guide to future performance. The value of investments can go down as well as up and you may not get back the full amount you invested. Tax and financial regulations can change. Any figures quoted above are correct at the date of publication.