Britons have too much money in cash savings and not enough in shares. That’s according to the Centre for Policy Studies (CPS), a leading independent think tank.
Should more people be investing in shares today? Let’s discuss.
Britons lagging behind
According to the think tank, the UK is way behind other countries when it comes to retail investing.
Indeed, its research found that retail investors in the UK control just 21% of the country’s assets under management. That compares to 28% for France, 30% for Germany, 34% for Italy, and 84% for Spain.
Compared to these countries, the UK also has a far lower percentage of household wealth invested in listed shares.
Worryingly, CPS research found there is currently around £1.8trn worth of cash in savings accounts across the UK. This is an issue due to the fact that cash savings tend to be eroded by inflation over time (meaning that they don’t help people grow their wealth).
“Under normal circumstances, this neglect of the stock market would be bad for the UK, its citizens and its growth prospects. But in the current inflationary environment, the huge amount of savings left in cash is positively disastrous”, wrote the CPS.
Shares outperform cash over the long term
The CPS research supports a hunch I’ve had for years – Britons generally don’t invest enough of their money.
It never ceases to amaze me how many people in the UK keep all of their money in savings accounts and Cash ISAs when history shows they could potentially obtain far higher returns by investing some capital in shares.
Of course, shares are riskier than cash savings. Share prices constantly move up and down, so it’s possible to lose money.
Yet over the long term, shares (as a whole) really only go in one direction. And that’s up.
And the returns are attractive.
Just look at the MSCI World Index (a well-known global stock market index). Over the 10-year period to the end of June, it rose 10.1% per year (in US dollar terms). That’s a much better return than savings accounts provided over this period.
Many individual stocks have done much better than this. Apple, which is listed in the US, is a great example here. Over the last decade, shares in the iPhone maker have gained around 30% a year (meaning a $5k investment has grown to around $63k).
Investing is easy
The good news, for anyone thinking about investing in shares, is that the process is very easy today.
Through online platforms such as Hargreaves Lansdown and AJ Bell, an account can be set up in minutes.
And minimum investments are very low. With Hargreaves Lansdown, for example, investing in share funds can cost as little as £100. So literally anyone can do it.
