Cash savings vs. Investment

How are you folks distributing your savings?

I've just checked my distribution and I am wondering whether I've gone too heavy on cash savings.

4% invested into medium-risk funds
8% in peer-to-peer (RateSetter)
88% - cash in various saving schemes getting a max of 1.5% interest.

Has anyone ever hired a wealth manager? Worth the fees?

Cheers,
Nick

 

Not financial advice; but your investments in cash are losing money every year with inflation. 88% in cash is poor investing.

 

If you're 20, I'd say thats too conservative - if you're approaching retirement I would say that sounds reasonable. If you're in the middle then it's going to depend on lots of other things - whether you have kids, whether you own property etc etc

I don't think there is any harm in periodically paying for advice - may help you think critically.

 

Cash is always best invested. I'd rather have £0 in cash on hand or in the bank and £1M spread across assets than £1M cash in bank

 

Depends if your portfofio is worth £100 or £100m. Techincally £5m+ would be private banking - wealth management would be £10m+. Benefits of both are a personalised service and tax management which at that level is important. You can't hire a wealth management company - you need wealth to give them.

 

I like to distribute it in bars and on loose women. That's probably why I haven't got any. They say money talks - mine said 'see ya'. Seriously though I always like property - get the right tenants and it can earn more than the bank whilst appreciating (usually).

 

Haha, I thought that was just mine.

 

If you leave money in the bank, someone else is making a better a return on your money. Realistically with little risk you could spread this money across dividend bearing stocks and get around 4% with "somewhat" minimal risk.

 

Actually giving financial advice is so complicated I understand why people avoid engaging and as a result end up making bad decisions.

Key questions:
1. How long do want to invest your money for? - Possible answers short term - less than 12 months - cash , long term 10/15 years plus - stockmarket via good managed funds
2. Are you expecting a major change in circumstance - earning up / down - inheritance, job loss, marriage, divorce / offspring!
3. Planning a House purchase / sale / paying more in rent!
4. Attitude to risk - may change your answer to question 1.

I am not a financial advisor but these are all the sorts of things they start asking.

No easy answer but as one of the older members on this forum I would say who been though some of this I would say:

1. Keep enough cash at bank / equivalent to cope with job loss / emergency - I am self employed and keep 12 months worth - employed people with an immediate opportunity to job hop then 3 months is fine.
2. I assume all Credit Card / expensive debt is cleared - otherwise sort that out visit moneysavingexpert.com for more info.
3. Long term money in SIPPs / ISAs to protect against capital gains / immediate income tax liabilities.
4. SIPPs / ISAs are only wrappers and choice of stockmarket invested funds / bonds / cash inside them is critical, the issue is here is to spread your risk and have multiple funds with different managers - don't want to be stuck with all your 'hard earned' in a Woodford fund that is 'gated' etc.

Hope this helps - the question posed was very simple, the circumstances behind the individual were not detailed hence this 'broad brush answer'

Final bit again - I am NOT a financial advisor - please get that!


JohnP

 

Johnp... I'm unsure about something.... Are you a financial advisor?

 

No is the answer. I have worked with a few personal friends to help them avoid the clutches of The Charlatans and Thiefs that work for 'wealth management' companies who still charge fees for 'not a lot of value', I also have done some voluntary work at Citizens Advice so have seen the hugely negative impact of poorly managed debt and everything that it brings.


JohnP

 

True, the so called money men do nothing but enrich themselves. Many mutual funds have hit the buffers because cheap index funds are out performing the latest and greatest fund manager. Just look at Neil Woodford, if you want to see the issues and problems with a lot of mutual funds.

 

Collectables are a fun hobby and can be a good investment as long as you don't get sucked into collecting for collecting's sake

When I say collectables I'm lumping together everything, paintings, antiques, whisky, numismatics, watches, lego, classic cars, sneakers and whatever else

This type of investing is nice because you just gain knowledge organically as you enjoy the subject and it doesn't feel like more work

I don't know anything about bonds or stocks or high risk funds, I should, but it just feels like a there's a road block in my brain that says "that's too complicated, don't even worry about that"

 

Ive always done well with personalised number plates. Usually from dvla auctions.
There's always a few that go for a lot less than they're worth but you have to take hammer fee and vat into account.

 

If your cash savings are only getting you 1.5%, you are probably losing money/breaking even due to inflation. UK banks are generally garbage for cash savings, look overseas if you have the enough for it to be worth it. I have an account in Singapore that gets 5%. There are better options with rates closing on 10% in other parts of the world but the currency risks might be too high for some.

 

Thanks all for the replies - I think I need to rethink my strategy!

 

Be careful with money overseas. It's not as secure as they would lead you to believe. Bricks and mortar has always been the way to go.

 

I think it depends on what options are available to the individual. Overseas is arguably a bit vague, I wasn't implying one should go open an account in Malta or Belize or whatever other low-tier jurisdiction is on the black list. There are gems out there, Singapore has some of the best capitalized banks in the world (The UK didn't even have a bank in the top 50 but that could be outdated). Georgia is looking really good both in terms of banks, currency and brick & mortar but it's a little less glamorous and is not risk free. Malaysia is also up there.

Brick and mortar is fine but it has its own unique set of risks/rewards which are so location specific, I don't think there's anything I can add.

 

My details were 'leaked' from HSBC offshore and ended up with me being named in some well known papers... so not always low tier. Ok so money is safe (perhaps) but information certainly isn't - I certainly wouldn't tie up investment money hoping for a decent percentage return when there are better alternatives to saving in *any* bank.

 

The issue that a lot people don't get is that historically leaving money in cash, you are bound to loose money in real terms over the long term as others have pointed due to inflation. Any investment or fund offering higher return than cash carries risk, risk can be great in that it can be opportunity to make a well above inflation return, it can also be bad in that you risk loosing some / all of your money invested.

So my thoughts ideally you would want to spread you risk (both the good and bad side of it) around in terms of both different types of funds, different asset classes (property, share, bonds, gold, collectables). Having done that you can then work out the most tax efficient and cost effective way of managing things. Also worth considering time / effort - managing land property can be problematic, paintings / collectables need storing and insuring etc. etc.

You also might want to consider how liquid the investment is, for example on the forum we deal in domains so understand the difference between trade and end user pricing, but generally if you need to raise funds you can do so quickly it just a matter what sales route you take as to what you get. If you own property it can be sold might take several months - in a slow market longer etc.

What is really disappointing for me is to see lots of people suckered into investment schemes that are heavily marketed (which means those costs are paid out of investors funds) in the likes of self storage units, solar energy schemes etc. airport parking places, hotel rooms. Often getting folk to transfer their existing pensions (which are probably in half decent funds) into these schemes offering supposedly inflation busting returns which in reality are not guaranteed, and more often than not the money disappears in eye watering fees, management costs and probably a totally dud underlying investment. Folk because they don't understand how their existing investments are allocated then make a life changing (in a bad way) decision.

So my closing thought is a general warning - if something you are offered looks too good to be true it probably is!


JohnP