City regulator warns don't store excess cash

Historically, when you think of ‘savings’ you automatically think of cash. Cash has always been seen as a safe bet, which would be true if interest rates were in line with inflation. However, that is not the case in recent years. In 2020, the Bank of England set its base rate to 0.1% in response to the Covid-19 outbreak and with us heading into 2022, inflation is set to rise to 6% by the summer. Therefore, the purchasing power of your cash savings is dramatically reducing over time. Cash is key to any well diversified portfolio but hoarding too much cash could be seen as a larger hinderance on your investment returns over the medium to long term. 

Recently, the Financial Conduct Authority (FCA) conducted an investigation which led to identifying that 8.6m consumers were storing more than £10,000 in cash that could be used as an investible asset.* The report, which outlined their goals for 2025, was to inform higher risk tolerant investors, so those that would be happy to take some risk with their cash or at least had the ability to do so with perhaps more time on their side to invest, that they were missing out on potential investment returns due to their hoarding of cash. The FCA has set an aim to reduce this by 20% over the next three years.**

Cash is an important aspect of a diversified portfolio

As a rule of thumb, it is usually recommended to hold three to six months’ worth of expenses in an instant access account to cover any emergencies. Anything over this value could be considered excess cash and when appropriately invested could see a higher growth value over time versus leaving it in cash with the eroding effects due to inflation. Of course, your portfolio is unique to you and your financial needs and circumstances, it's about determining what works best for you.  

With cash no longer being the safe haven it used to be, savers are looking elsewhere, to protect and grow their money over time. One alternative is investing in the stock market. This may be a daunting for those new to investing or investors looking to return to the market but do not know where to begin. To help consumers and especially new investors make better informed investment decisions, the FCA will be launching a new £11m ‘investment harm campaign’.*** This campaign will identify and target people investing in inappropriate high-risk products with the intention of reducing the number of consumers making needlessly risky investments. This includes reducing investment scams by improving the general “assertiveness and agility” of how the FCA detects and disrupts potential scammers and fraudsters. In 2020/21 consumers lost nearly £570m to investment fraud – three times higher than the amount lost in 2018.***

Where to start investing?

When it comes to determining how to invest your excess cash appropriately, it is best to sit down and really take the time to determine what your financial goals are. This is the best way to manage expectations and research which service is the most suitable to help you reach those goals. There is a large amount of choice in the investment market which can be very overwhelming. With choice comes the ability to tailor your investments to match your needs. Whether this be seeking financial advice, using a fully discretionary service or even do-it-yourself platforms. Depending on your need and level of knowledge you’ll be able to find a service that works for you. 

How Investment Champion can help

Whether you are a first-time investor or a well-seasoned investor, Investment Champion can help you to invest in a manner that is aligned to your risk appetite, understanding how much risk you’re willing to take with your money, in order to help you achieve your financial goals. Combining the experience of The Private Office’s (TPOs) in-house investment experts with over 30 years’ experience in the industry, Investment Champion can make investing simple, affordable and easier than ever. Their readily available diversified model investment portfolios are designed around your level of risk appetite and asset mix preference, to take away the stress of picking the individual investments yourself. Portfolios are ‘re-balanced’ automatically twice a year, which means that your portfolio will be adjusted to maintain the right mix of assets that fit with the level of risk you’re happy to take from the outset. This means that you can be confident that your portfolio always reflects your original investment choice. You have a selection of either a traditional or sustainable (such as ethical or ESG as they are more commonly known in the industry) mix of assets with a range of four risk levels. To invest tax efficiently, you can do so through a stocks and shares ISA (S&S ISA). If you are looking ahead to retirement you can select to invest through a self-invested personal pension (SIPP) or make use of your capital gains tax allowance by saving with a general investment account (GIA). Whether you have a cautious risk appetite or adventurous, you can find a portfolio that is right for you. 

If you want to learn more about how we can help with you build your own portfolio, why not take a look at our products page or contact us for further assistance.

Please note: Past performance is no guarantee of future returns. The value of investments and the income from them can fall as well as rise, you may not get back what you originally invested.

*https://savingschampion.co.uk/news/savings-news/financial-conduct-authority-fca-calls-for-more-consumers-to-invest-rather-than-hoard-cash

**https://www.fca.org.uk/news/press-releases/fca-sets-out-plan-tackle-investment-harm

***https://www.fca.org.uk/publications/corporate-documents/consumer-investments-strategy