UK Money News
21st February 2008
Investors urged to learn from Northern Rock fiasco
Investors should learn a valuable lesson from the situation facing Northern Rock shareholders, the editor of a financial web site has warned.
As part of the plan to nationalise the stricken lender, existing Northern Rock shareholders will be paid a sum in compensation in exchange for their shares.
However, because the valuation will work on the basis that £25 billion of loans from the Bank of England has been withdrawn, analysts are speculating that the shareholders could end up with nothing.
The plight of the investors should provide a cursory lesson for stock market novices on the perils of investing heavily in a single company rather than spreading the risk, Rachel Lacey of Moneywise magazine has said.
Ms Lacey explained: "This highlights the risk of investing directly into companies. We always say that if you want to invest in the stock market, the most sensible way of doing that is to do so via an investment fund, like a unit trust, as that way your money is going to be spread across a much bigger range of companies."
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