Long-Term Returns or Cash in the Bank?

When weighing up the pros and cons – the choice between holding large amounts of cash long term in a savings account versus investing, could have a huge impact on your future wealth. Pre-covid, data highlighted the fact that a considerable number of people already held substantial amounts of money in cash, including those with £250k or more in investable assets.


Data revealed, that 18% of those with £250k or more in investable assets had 40-60% of these assets in cash, or in monetary terms, at least £100k. Surprisingly, this same group had also benefitted from the lockdown, revealing 35% had more money to invest than usual. During periods of stock market volatility, it’s totally understandable that cash feels safe. But in the long run, it can actually do more harm than good if you are looking to yield fruit from your efforts. That’s because, if you are leaving large amounts of money sitting in cash, you could be losing out on substantial returns over the long run.

The rates of return on cash accounts are extremely low and have plummeted further still since covid appeared, with the average currently below the rate of inflation. Research also revealed that the same group are aware of the opportunities, as 42%, the largest of any wealth group, think there are good opportunities in the current market, whereas 29% would like to move their cash to investments but don’t know which investments, or where to begin. Of the same group, 37% now plan to be more active with their investments overall.


The rule of thumb is to save at least six months of your salary in cash, and then invest in a diversified asset spread that can deliver a long-term return for your specific goals. It’s also important to do this in the most tax-efficient way possible, by making sure you fully utilise your allowances, including the Individual Savings Account (ISA) allowance and the pension allowance.


Whatever your financial goals are, you might choose to invest because you are looking to achieve potentially higher returns on your money than you might get from holding cash, and are comfortable with the idea of setting your money aside long term (at least five years or more). Whether you’re concerned that you’ll lose your money or just don’t know where to begin investing, it’s common for some people to hold large cash balances in deposit accounts, especially in times of market uncertainty. But history tells us, cash has not been a good store of value for individuals due to the corrosive nature of inflation eating into its purchasing power over time.

If you have excess cash, you should consider how to protect and grow your capital to meet your specific needs. Every investor needs a cash buffer in case of emergencies, but if you hold too much in cash, it can have a negative impact on returns.

Investing does of course, carry its own risks. But a portfolio that is well-structured, well-diversified and tailored to an individual’s requirements – managed sensibly, ought to protect capital from inflation and the decline in purchasing power over time. Diversifying your investment portfolio is one of the best ways to reduce risk, and in turn, promote a healthy and steady growth on your investments.


Cash does lose value, and this is particularly true in a low-interest climate. If you’d like to talk about the assets you hold, please contact us at info@pccwealth.com

We look forward to hearing from you.

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Source data: Quilter research of 2,005 UK adults aged 40+ carried out by Toluna. According to ONS figures over-40s hold 90% of the UK’s savings.