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Investment returns through holding paper money

With low interest rates that are unlikely to increase in the foreseeable future, it is not surprising that many of us are rethinking our investment strategies, looking for new opportunities. Typical investment opportunities include stocks, buying properties to rent, with some investors even turning to precious metals such as gold and silver. However, there is one option that not many people consider, but, can be very lucrative – buying banknotes. When many of us think of banknotes as an investment, we tend to think of dusty notes that have been stored away in our attic and by chance, are now worth a fortune. However, although such rare finds could be very profitable, notes which have passed through our hands on a daily basis could still offer a very nice return if looked after properly. Let’s look at the good old fashioned one pound note that I am sure many of us will still remember. Although the series number (batch) has a huge impact on valuations, it is not uncommon for such a note and kept in good condition, referred to as being uncirculated, to command a guide value of around six pounds today. So, that generates an impressive return of six hundred percent over say a forty year hold period as 1984 was the last issue date. This represents a return on investment of around five percent per year. Looking at the same investment period for stocks, average yearly returns are close to ten percent. But, it could be argued that the systematic changes to the investment market during the eighties and the nineties, it is unlikely that we will witness similar investment returns going forward. If we look at the last twenty years for stocks, the average yearly return is around six percent, marginally higher than simply holding onto the old one pound note. Furthermore, and although the future is never certain, with bank interest rates being exceptionally low and unlikely to increase, it is also unlikely that the stock market would yield better returns going forward. However, before you all go out and start buying good hard cash, there are a few things you need to bear in mind. As many banknotes are now polymer, it is likely that condition shall not be as important as more notes from today will be in far better condition than old fashioned paper notes. Furthermore, it might be hard to dispose of large quantities within a short period of time, even if you were to purchase higher denominations of say fifty pounds. But, and for want of a better expression, you would like to have a tickle, you will not go far wrong with buying some notes in super condition and holding onto them for the future, even to pass on as an heirloom or for that dream holiday you had always dreamed off during retirement. This article was written by Adrian Gadek, founder of Bulldog Banknotes (www.bulldogbanknotes.com).


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