Want to know a surefire way of making yourself poorer? Taking the easy option and locking your savings into a low-maintenance (and low-paying) Cash ISA. Right now, not a single no-notice cash product offers more than 1.44%, according to Comparethemarket.com.
Yet CPI inflation in the UK runs at 2.1%. So you can forget about building a hefty cash pile for a big purchase, retirement, or a rainy day, removing one of the key reasons why any of us save in the first place. Savers using these products are actually seeing themselves become poorer the longer they leave their money stashed there.
Banking beauty You’d be much better off using your hard-earned cash to invest in the stock market, I believe. And certainly for those looking to build a big nest egg to retire on. Equity market investors can expect returns of around 10% over the long term. And there’s a galaxy of shares in great shape to thrive in the decades ahead and bring their shareholders along for the ride.
Take Bank of Georgia (LSE: BGEO), for example. The emerging markets of Eastern Europe and Asia are proving to be happy hunting grounds for many UK-listed stocks. As one of the biggest banking operators in the Eurasia region, this particular one can be confident of producing strong and sustained profits growth as population levels rise and GDP growth clicks through the gears.
The firm’s robust earnings potential was illustrated in the first half of 2019 when pre-tax profit ballooned 36.9%, a period when strong trading at its retail bank helped the loan book swell 30.5% year-on-year. Even as issues like rising competition and tighter regulation bite, it’s clear Bank of Georgia is capable of delivering some truly stunning profits growth.
Yet despite this, the FTSE 250 firm currently boasts a dirt-cheap forward P/E ratio of 5.4 times, suggesting (to me at least) it’s being shockingly undervalued by the market. Combine this with an inflation-bashing dividend yield of 6% and I reckon Bank of Georgia is a top buy for contrarian investors.
Build a happy retirement As an owner of housbuilder shares (Barratt and Taylor Wimpey (LON:TW), if you’re asking), I’d like to champion Redrow (LSE: RDW) as another income hero that could help you to retire in luxury.
Boosted by a blend of solid trading conditions and rising construction rates, Redrow’s revenues and pre-tax profits jumped 10% and 7%, respectively, in the 12 months to June. Forget about Brexit. This particular builder notes that “demand for our homes is strong with reservations running ahead of last year.”
So great is the UK’s homes shortage that, despite the economic and political uncertainty, newbuild sales continue to shoot through the roof. And this gives me confidence that profits at this particular FTSE 250 share can thrive for many years to come.
Redrow carries a dividend yield a fraction shy of 6% and also boasts a super sub-10 forward P/E ratio of 6.5 times too. As is the case with Bank of Georgia, such a low rating flies in the face of some ripping financials released in recent weeks and suggests share pickers are missing a trick.
Why not capitalise on this and grab a bargain?
Royston Wild owns shares of Barratt Developments (LON:BDEV) and Taylor Wimpey. The Motley Fool UK has recommended Redrow. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019