A quarter of high-net worth (HNW) investors (those with over £100,000 in investable assets) currently hold more than 50% of their wealth in cash, according to new research from Rathbone Investment Management.
Despite interest rates for savings remaining low in the last year, HNW investors continue to keep the majority of their wealth in cash. While 25% of HNW investors keep over half of their wealth in cash, a further 35% of them keep at least 26-50% of their savings in cash.
According to Rathbone Investment Management, one of the key reasons why HNW investors opt to hold their wealth in cash is because they believe it would be the safest option.
However, ironically, due to the low interest rate environment and high inflation, leaving too much money in cash could risk it becoming de-valued over time. Just under half (49%) of HNW investors said that they believed cash to be the safest option, whilst a further 18% said a fear of taking risk was a key driver for keeping wealth in cash savings.
Furthermore, regular investors (those with under £100,000 in investable assets) are also heavily reliant on cash savings. The investment firm found that 46% of regular investors keep more than half of their wealth in cash, with 20% of them keeping between 25% and 50% of their wealth in the asset.
Surprisingly, the amount that investors held in cash did not vary drastically across age groups, despite young investors usually advised to hold less of their wealth in cash in order to benefit from compound interest on their investments from a young age and withstand any volatility.
Almost a third (31%) of investors aged under 35 held over half of their wealth in cash, compared to 41% of those aged between 35 and 45 and 40% of those over 40.
Commenting, Rathbone Investment Management investment director Robert Szechenyi: “Cash remains king as investors remain cautious. Despite the threat of low interest rates devaluing their wealth over the long term, investors still believe cash to be the safest option for their money. This is largely down to the economic and political uncertainty currently at play in the UK and wider afield.
“Investors are concerned about the impact that impending events such as Brexit will have on the markets and therefore are hesitant to invest a significant proportion of their wealth into the markets.
“However, it’s important to remember that investing is a long-term game, and to make the most of compounding staying in the market over a long period of time is the best way to access good returns. Ensuring that your investment portfolio is well-diversified across assets and regions will help to offset volatility.”
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