£276bn worth of reasons to invest in UK shares?

Reasonably than spend money on UK shares, in accordance with the Monetary Instances, savers have determined to place £276bn into financial institution accounts that don’t pay any curiosity.

For my part, with inflation consistently eroding the worth of cash, this isn’t a wise resolution.

Folks in all probability view it as a ‘risk-free’ choice, believing {that a} financial institution or constructing society is unlikely to go bust. And even when one did, the federal government’s Monetary Companies Compensation Scheme protects deposits as much as £85,000.

I believe these savers take into account themselves to be risk-averse. Nevertheless it’s simple that the actual worth of their money goes down. Absolutely the purpose of investing is to try to develop your cash?

Even when the £276bn was redeployed into interest-bearing accounts, savers could be higher off.

Nonetheless, with my spare money, I choose to purchase UK shares.

Why’s that?

That’s as a result of historical past exhibits that it’s potential to build up wealth by investing within the inventory market.

For instance, from 1 February 2020 to 31 January 2025, the FTSE All-Share index, which captures 98% of the worth of UK equities, elevated by 37.9%. This determine — equal to a mean annual improve of 6% — is predicated on all dividends obtained being reinvested.

A software on the Financial institution of England web site exhibits that, over the identical interval, the buying energy of the pound has been eroded by 24.6%.

Nonetheless, this evaluation comes with a couple of well being warnings.

There’s no assure that historical past will probably be repeated. Simply because the UK inventory market grew prior to now, it doesn’t essentially imply it’ll develop once more. As billionaire investor Warren Buffett as soon as stated: “If previous historical past was all that’s wanted to play the sport of cash, the richest individuals could be librarians.”

And, as famous above, a number of the progress of the FTSE All-Share index got here from the reinvestment of dividends. However because of the volatility of firm earnings, payouts can go down or be suspended.

Subsequently, investing in shares and shares isn’t risk-free.

The largest and greatest?

My private desire is for FTSE 100 shares. In principle, as a consequence of their sturdy stability sheets and world attain, the earnings of those corporations must be extra steady.

And most of them pay dividends.

Nationwide Grid (LSE:NG.) is a inventory {that a} cautious saver may take into account.

That’s as a result of its share value tends to be much less unstable than most. Over the previous 5 years, its month-to-month beta has been 0.28. In different phrases, if the inventory market adjustments in worth by 1%, Nationwide Grid’s share value will – on common – rise (or fall) by 0.28%.

And it presents a wholesome dividend. Over the previous 12 months, it’s paid 54.96p a share. This implies it presently (17 February) yields 5.7%. The common for the FTSE 100 is 3.6%.

Nonetheless, the transmission and distribution of gasoline and electrical energy requires costly infrastructure. The corporate stunned traders in Might 2024, when it introduced a £7bn rights concern.

It’s additionally regulated, which suggests it has to fulfill sure efficiency targets. In any other case, it may face fines or different penalties.

Nevertheless it doesn’t face any competitors and — for over 20 years — has persistently elevated its dividend annually.

For these cautious savers who at present aren’t incomes any curiosity on their money, Nationwide Grid might be a UK share to contemplate.