Find out why you should invest at all
It’s reasonable to ask why you should invest at all. With your retirement funds being so precious isn’t it wiser to hold them in a savings account, with the implied safety this brings? The answer is that this perceived security is a false reality. Holding too much cash over the long term is a bad idea, because inflation will erode your wealth’s real value. Even low inflation will not be overcome by the paltry returns from savings accounts.
In the example here we take a sum of £100,000 invested from December 2007 to the end of 2021. In the chart we can see the striking difference in outcomes when compared to cash savings by the end of 2021. We chose that timeframe to take in the financial crash of 2008 and give a more accurate portrayal of how markets can behave in difficult times, too.
Source: Netwealth and Bloomberg. The values represent £250k invested in 1 month Libor and an example Netwealth Risk Level 4 portfolio minus UK RPI.
The takeaway from these charts, and from the destructive power of inflation in general, is that what you perceive to be a safe home from your money may not be the case. To invest your money – deciding how much risk is appropriate to you – really is the only option if you want to safeguard your funds for retirement.