With 2023 just around the corner, attention once more turns to thinking up a New Year’s resolution. I am not alone in this respect. It is estimated that up to 15m Britons are searching for one too. But the perennial problem is how to stock to it! A few years ago, I made a resolution to myself that I would begin investing. I kept it up too and it turned out to be one of the best moves I ever made.
Today, with a cost-of-living crisis and rampant inflation I am determined to make sure that I keep my finances in as healthy a position as possible. That means continuing to invest all the spare cash I can muster. After all, history demonstrates that investing is a powerful tool to build wealth.
Financial goals
A recent survey of 2,000 UK adults by the social investing network eToro highlighted that the most popular 2023 New Year’s resolutions are money-related. This trumps more common goals around wellbeing and fitness.
Unsurprising given the present backdrop, the most common goal is improved budgeting. This is followed by investing for the future and building an emergency fund.
It is clear that many people have decided to fight back against the cost-of-living crisis next year rather than burying their heads in the sand.
Saving vs investing
This month the Bank of England raised interest rates to 3.5%. A quick search reveals that most current accounts pay nowhere near that rate. For those that do offer reasonable rates, credit balances are strictly limited.
Despite interest rates on savings accounts rising recently, with the annual rate of inflation currently running at 10%, the value of those savings will be worth less in the future. Therefore, I think investing in shares provides me with a better opportunity for my money to grow.
Today, the FTSE 100 is trading at the same level as it was at the beginning of the year. However, this figure fails to take into account dividends. The final expected yield for 2022 is 4.1%. Of course, this is for just one year. Over a much longer timeframe, returns from the index have consistently beaten inflation.
Stock picking
Here, at The Motley Fool our mission is to make the world smarter, happier and richer. Investing in an index like the FTSE 100 or S&P 500 is a great way for individuals just starting out on their investment journey. Indeed, it is how I started three years ago.
However, I quickly realised that relying exclusively on such a strategy meant I was missing out on the opportunity to earn dividends from investing in stocks directly.
As we head into 2023, dividend stocks are popular again. No surprise as several blue-chip cash-generative businesses are offering extremely attractive returns.
Top of my buy list is mining giant Glencore, which has seen a meteoric rise in profits and is returning $4bn to shareholders. Equally, HSBC has seen its net interest income improve on the back of rising interest rates. I also like the look of Legal & General. It has been steadily raising its yield for over a decade and is forecast to hit 8% in 2023.
Investing for me is not only rewarding but fun too. It is the best New Year’s resolution I ever made!
