Compound interest

Spectator, The, Mar 15, 2003 by Fildes, Christopher

One stone-cold certainty now is that governments will borrow as much money as we care to throw at them. That seems to me the best of reasons not to throw it. Borrowing will have to bridge the gap in Gordon Brown's finances, and if you are in no hurry to lend to him now, you can be sure that he will come back to you later.

Observe that share prices have fallen so far that blue chips (some are bluer than others) now yield more than government stocks. They have not been so modestly priced, in these relative terms, for the best part of half a century. When the Prime Minister spooked us, last month, by telling us not to worry about the stock market, I started looking for bargains in boredom - boring shares in solid companies which can be expected to plug on through bad times and good'. They would plug on with paying their dividends, too, and over time, all being well, would pay more. In the years that may now lie ahead, a steadily compounding income will be well worth having. Indeed, a share that can provide it will cease to be boring.