![]() Market rises and falls are driven by human emotion, which can cause overreaction to bad news. ![]() So investors who opt for stock markets over cash need to be prepared for a bumpy ride.Buying a stock that is struggling in the hope of a recovery is not for the faint-hearted, but getting it right can be highly profitable. While long-term historic data strongly suggests stock market investments stand a better chance of beating inflation than other investments, they are also volatile. "This is a classic area where clients need ongoing support and where advisers can really deliver that ‘peace of mind’, as well as helping ensure clients’ investments are in the right place to meet their goals.” “Investors view ‘trust and peace of mind’ as being a key benefit of receiving advice," she adds. “The question of ‘should I invest in cash?’ is not straightforward, and for the longer-term saver all the data points to investing being the best option for many. “The cash debate is a perfect example of where advisers deliver value to clients,” says Gillian Hepburn, Schroders’ Head of UK Intermediary Solutions. For many, this is where financial advice will be invaluable. There are lots of reasons to hold cash, and savers’ individual timeframes will differ. So it’s a no-brainer: stock market investments are a better bet for long-term real returns? Over very long periods – during which inflation and interest rates have gone through both highs and lows – cash has retained its spending power, but only just.īy contrast, stock market investments have delivered inflation-beating returns over all periods highlighted in the chart. In the past five, ten and 20 years, cash savings have failed to keep up with price rises and so depositors would be worse off. That is despite the fact that inflation until recently has been low. The recent era of ultra-low interest rates, from which we’re now emerging, has meant that cash has been unattractive for investors. The stock market has delivered strong long-term returns through very different conditions So while stock market investments may be risky in the short run, when viewed against inflation they have offered far more certainty in the long run. In other words, for every 20-year timeframe in the past 96 years, equities delivered inflation-beating returns.
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