Should you save or Invest?
Whilst savings accounts have traditionally been the safe place to keep your hard-earned cash the current climate of low interest rates and increasing inflation might be damaging to your long-term wealth.
Many people are nervous of investing for fear of losing money.
So, what is the answer?
The simple answer is to save for what is around the corner and invest for the future.
Wikipedia defines saving as “income not spent or deferred consumption and the low-risk preservation of money”
Holding some money in cash is a good idea – this should be used for any money that you are going to need to use in the short term – for example the next 3 to 5 years.
You could consider using the following type of accounts to achieve this – deposit accounts, cash ISA’s or premium bonds.
In the current climate any money that you hold in cash type accounts, will almost certainly result in your money losing its value in real terms over the medium to long term.
If you want to see a real return on your money in the medium to long term, you need to move up the risk ladder to achieve this.
Again, going back to trusty Wikipedia, they define investing as “to allocate money with a positive expectation of a positive benefit or return in the future”
There are lots of different ways that you could choose to invest, however I am not going to delve to deeply into the variouis options available to the investor in this article.
That said, in my humble opinion the best way for the majority of people to invest would be to use Multi-asset funds.
Multi-asset funds are designed to make life easy for investors. They offer a one stop ‘mini portfolio’ so that investors don’t have to construct one themselves.
The idea is that instead of battling the complexity of picking a range of funds, equities, bonds and other assets, investors can simply pick one fund that does the lot.
The fund manager is responsible for designing and maintaining a well-balanced portfolio so the investor can sit back and relax – and hopefully wait for returns to roll in.
Historically, money invested in a multi-asset investment – has beaten inflation and outperformed cash. Research carried out by Royal London found that £1,000 placed in an average savings account a decade ago would be worth just £900 (in real terms) 10 years later. In contrast, £1,000 invested in a multi-asset fund would be worth £1,500, even after inflation.
An investor may get back less than the amount invested. Information on past performance, where given, is not necessarily a guide to future performance.
Seek Professional Advice
Before you invest in the stock market, it’s a good idea to get some independent financial advice, to decide on your attitude to risk, your financial goals, and look at your complete financial picture.
This means you can select an investment strategy that is right for you.
I have been providing advice to clients on the best way to manage their money and build their wealth their money for over 30 years.
For a fresh look at your money and investments contact us on 01564 732770 and book a review meeting.