Thank you Steve for bringing this article in The Telegraph to my attention: https://www.telegraph.co.uk/investing/shares/fear-stocks-costs-british-savers-127bn-lost-returns/
The data has been tortured somewhat (journalists, eh?) but the message is clear:
We are giving away money hand over fist.
In so doing we forego the chance of improving our standards of living and our children’s.
Is there a bigger financial mistake we’re making year in, year out? This is exactly the sort of behavioural error any half-decent financial planner can help anyone avoid.
The notion that cash is “safe” and shares “risky” are amongst the biggest investment lies there are.
It’s true, in the short-term, we need cash to feel secure, to cover costs and as an emergency fund. That’s safety, that’s security, that’s completely sensible.
In the long-term (3 years+) cash is a complete disaster zone. It’s completely UNSAFE; you get poorer every year.
Why? A cash-ISA pays about 1% pa – inflation is 2.4% pa.
Your money will be worth less at the end of the year than the start, you are poorer and guaranteed to lose money every year.
How is that “safe”? Or sensible?
A decently diversified equity portfolio should produce about 5% pa on average versus inflation of 2.4% pa.
That means your money is growing, you are getting wealthier. You will have more to spend in the future than you have today. To me, that’s entirely SAFE and sensible.
There is £270bn in cash ISAs, and it’s missing out on up to £10bn of potential EXTRA return EACH AND EVERY YEAR! To put that into perspective PPI claims have totalled around £33bn over nearly eight years.
Imagine what a difference £10bn more could make each year!
Yes, there will be ups and downs but all you need to do is stick with it. That’s what eliminates the “risk” of investing in shares.
It is that simple.
future proofing your finances
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