Rachel Reeves

[rockinj]

I just can’t understand the ‘stocks and shares’ logic. Forcing people to take more risk, and not in start up funds (which would be even riskier). So all the money would go into trades on existing funds, or creating more units, and fund manager bonuses. Nothing would go to invest in actual companies. I keep thinking there really must be something obvious I’m just not seeing (not for the first time). I’m sure Lisa will put me right if so

It’s riskier to leave money in savings than investments over long term. Of course there is “risk” but overwhelmingly with patience the market outperforms leaving it in a bank with low interest rates. Just a simple tracker can provide decent returns.

 

[monmouth]

It’s riskier to leave money in savings than investments over long term. Of course there is “risk” but overwhelmingly with patience the market outperforms leaving it in a bank with low interest rates. Just a simple tracker can provide decent returns.

Oh yes of course, in the long term, but most people who invest in cash ISAs don’t want fluctuation risk, and it’s marketed as benefit to companies, which it may be in terms of share price, but not capital raising.

 

[JackSomething]

It’s riskier to leave money in savings than investments over long term. Of course there is “risk” but overwhelmingly with patience the market outperforms leaving it in a bank with low interest rates. Just a simple tracker can provide decent returns.

When you say 'riskier' I assume you mean you're at risk of earning less interest?

That doesn't bother me. I keep my savings spread amongst multiple providers and open/close accounts periodically to get the best available rates. I'm lucky enough to have a decent amount in savings and don't want to take any risks with it thanks. I have no interest in stocks and shares, while putting £20k every year into a cash ISA reduces the amount of tax I pay on my savings interest year on year (by a small amount, but it helps).

I have no problem with those who want to get involved in investments, but would rather not lose out on some tax savings from ISAs in a push towards something that I will not get involved in.

 

[monmouth]

When you say 'riskier' I assume you mean you're at risk of earning less interest?

That doesn't bother me. I keep my savings spread amongst multiple providers and open/close accounts periodically to get the best available rates. I'm lucky enough to have a decent amount in savings and don't want to take any risks with it thanks. I have no interest in stocks and shares, while putting £20k every year into a cash ISA reduces the amount of tax I pay on my savings interest year on year (by a small amount, but it helps).

I have no problem with those who want to get involved in investments, but would rather not lose out on some tax savings from ISAs in a push towards something that I will not get involved in.

Riskier means you can lose the capital. A friend of mine lost £500k plus £25k a year dividends in the 2008 crash.

Edit, and there’s probably another tech bubble to burst shortly. The markets look at lunatic levels to me. Rockin is right though, over the long term passive trackers outperform cash and 90% of managed funds, and if you have that kind of 10-20 year time horizon and no desperation for cash, it makes a lot more sense. When you get to my ripe old age though, asset allocation biased more towards cash is essential, so I’d be gutted to see my cash isa tax shield disappear.

 

[JackSomething]

Riskier means you can lose the capital. A friend of mine lost £500k plus £25k a year dividends in the 2008 crash.

Edit, and there’s probably another tech bubble to burst shortly. The markets look at lunatic levels to me. Rockin is right though, over the long term passive trackers outperform cash and 90% of managed funds, and if you have that kind of 10-20 year time horizon and no desperation for cash, it makes a lot more sense. When you get to my ripe old age though, asset allocation biased more towards cash is essential, so I’d be gutted to see my cash isa tax shield disappear.

That's what confused me about Rockin's post. How could putting money in a savings account be riskier than putting it in investments? As long as I stay under the £85k FCSC protected limit with any one provider, surely there is zero risk to my capital.

 

[monmouth]

That's what confused me about Rockin's post. How could putting money in a savings account be riskier than putting it in investments? As long as I stay under the £85k FCSC protected limit with any one provider, surely there is zero risk to my capital.

He means you’d be significantly worse off in the long term based on historical data or that’s what I read it as.

 

[JackSomething]

He means you’d be significantly worse off in the long term based on historical data or that’s what I read it as.

Fair enough if that's what he was saying, but he could certainly have worded it better if so.

I have no interest in taking risks with my money and if that means I don't earn as much from it over time, I don't really care. It's not as if the international financial markets seem particularly stable right now, so I'll stay well away from investing thanks.

 

[monmouth]

Fair enough if that's what he was saying, but he could certainly have worded it better if so.

I have no interest in taking risks with my money and if that means I don't earn as much from it over time, I don't really care. It's not as if the international financial markets seem particularly stable right now, so I'll stay well away from investing thanks.

My professor mate is the same. She’d rather risk inflation erosion than investment risk, and she’s a professor in finance, but knocking on, like me. I do laugh at her though. We teach students about CAPM, diversification, asset allocation and building portfolios, and she goes nowhere near it. It’s all about risk appetite…

I like a mix, so have about 30% invested for 15-20 years time if we live that long as an inflation hedge, hoping for a good uptick on top, and the rest in various term cash bonds matching ‘expected’ inflation…which I assumed might peak at 4% and run at about 2.5%. That’s why cash ISAs are so important to me, as a short/medium term inflation hedge. I’m not looking for profit there.

Edit, I’m not licensed to give advice. Other than know your risk appetite and tolerance, and if in doubt consult a professional

 

[PSumbler]

That's what confused me about Rockin's post. How could putting money in a savings account be riskier than putting it in investments? As long as I stay under the £85k FCSC protected limit with any one provider, surely there is zero risk to my capital.

The major risk with savings would surely be inflationary risk in that the growth in it doesn't keep up with inflation and therefore over time the value of the savings is less?

 

[JackSomething]

The major risk with savings would surely be inflationary risk in that the growth in it doesn't keep up with inflation and therefore over time the value of the savings is less?

There are clearly people in this thread who know a whole lot more about investing than my meagre knowledge on the subject!

My simplified understanding of the situation is that I'm not going to lose money from my starting position by investing in savings. Whereas there is the potential, however slim, that by investing in stocks and shares, I could end up with less than I started with.

I was getting between 5.5% to 6% on various accounts a couple of years ago, now it's down to around 4% to 4.5%. If it does keep dropping, I probably will visit an IFA to get some advice. A large portion of it will be going on a house purchase soon anyway! I'm looking forward to being mortgage free far earlier than I expected to be.

 

[monmouth]

The major risk with savings would surely be inflationary risk in that the growth in it doesn't keep up with inflation and therefore over time the value of the savings is less?

Ah…but how much time…

And would you bet your future on past behaviour being replicated…and no ‘black swans’

As you get older, those two questions tend to get a bit more pointed.

 

[rockinj]

Yes I’m talking about the inflationary risk attached to savings rather than investments that tend to outperform considerably if they’re left alone.

Personally I’d rather invest than save. I do have savings of course but that’s more for liquidity and easy access.

I respect the different viewpoint on this of course. But there are many different risk profiles as well. You don’t have to go high risk eg bonds.

I’m simply responding to the idea of incentivising investing which does make sense in many cases and there is actually a socialist case for this as it spreads wealth wider.

 

[Jack2jack]

The major risk with savings would surely be inflationary risk in that the growth in it doesn't keep up with inflation and therefore over time the value of the savings is less?

Yes, but you still have your capital, just means you can't buy as much with the interest you've earned, I'd rather that than lose my capital on high risk ventures. I am very risk averse, maybe that's why I'm not a millionaire, but I sleep at night. That's the way I look at it, probably bolloxs mind, I'm not a FA.

 

[JackSomething]

Yes, but you still have your capital, just means you can't buy as much with the interest you've earned, I'd rather that than lose my capital on high risk ventures. I am very risk averse, maybe that's why I'm not a millionaire, but I sleep at night. That's the way I look at it, probably bolloxs mind, I'm not a FA.

That's where I fall too. Thanks to everyone for their input on this thread though, it's good to learn more on the subject.

 

[exiledclaseboy]

My savings are all in one bog standard savings account because I’m a shithouse and I like to know where my money is at all times. I’m definitely not making the most of it.