It’s official! Not investing in stocks and shares can seriously damage your wealth

We know how important it is to invest your money in the stock market. But do you?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It doesn’t take a genius to realise that locking up your money in a cash account can have a serious impact upon your wealth.

According to Moneysupermarket.com, the best easy-access cash ISA currently on the market is offered by Paragon Bank. Its 1.25% AER interest rate could be considered paltry at the best of times, but with inflation squashing over this figure (CPI stood at 2.4% as of June) it could be argued that these accounts are actually working against you as the value of your savings steadily erodes.

Cash returns are crumbling

The stark danger in going for the low-risk option and opting for a cash account was laid bare by a recent report by think tank Social Market Foundation (SMF).

In its ‘Saving Better’ report it cautioned that money stored in instant access cash savings accounts during the past five years would have fallen by over 4% in value in real terms due to the impact of rising inflation.

SMF advised that 6.8m Britons really aren’t making their money work best for them, these people holding more money in cash assets than they would require to cover any ‘rainy day’ needs. In its report the organisation estimated that as much as £200bn worth of savings that are excess to any rainy day requirements are currently held in cash accounts.

Based on this figure, SMF estimated that savers have lost around £8bn in value from their savings over the last five years.

Intelligent investing

Here comes a perfect illustration of the power of stock investing.

SMF advised that, had this £200bn been put to work by being invested in the FTSE 100, this money would have swelled by 47% in value in real terms. This amounts to a jaw-dropping £94bn.

As the SMF commented (rather obviously!): “The value of moving funds in excess of requirements for rainy day savings into less liquid or riskier asset classes could be significant.”

Late to the party?

There were even more figures to suggest that millions of Britons are setting themselves up for a fall come retirement, a topic I’ve covered in some depth before.

SMF said that a shocking 26.5m working age adults in Britain don’t hold adequate asset balances in either rainy day or pension savings. To boggle the mind still further, it said that a staggering 14.4m working age adults in the UK are not saving at all.

Despite the best attempts of policy makers, regulators and consumer groups, UK households do not save enough. The clear links between saving, wellbeing, living standards and economic growth make the UK’s poor saving performance a major social policy concern,” the think tank said.

It’s clear that by not taking the bull by the horns, many of us could well be endangering ourselves by investing in the wrong places or by not investing at all. It’s never too late to start, however, and thankfully there’s no shortage of investment experts like The Motley Fool that are ready and willing to help you to protect yourself in retirement. So get on it!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Moneysupermarket.com. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »