New investors spring into action

15th April 2021

With interest rates plummeting to record lows, savers are discovering that cash is not always king. This is encouraging a new band of investors to dip their toes in the investment market.

While some families have suffered financially during the pandemic, many have saved significant sums due to a reduction in spending on non-essential items. Official data1 shows the UK household savings ratio soared from 9.5% in the first three months of 2020 to a record 27.4% in the second quarter and has remained historically high since.

Save or invest?

Bank of England data shows £125bn was squirrelled into savings accounts last year and that figure is expected to rise substantially during the first half of 2021. As a result, many people have seen their savings balances grow at a time when ultra-low deposit rates offer little in the way of return, prompting many to consider alternatives to holding cash and take their first tentative steps into the investment market.

The value of advice

With so many funds available, the investment process can appear daunting and new investors often find it difficult knowing where to start. The key is to formulate a sound investment plan with sensible goals and to seek advice. A study seeking to quantify the value of financial advice, found that people have better financial outcomes when they have an ongoing relationship with an adviser, ‘Those who reported receiving advice at both time points in our analysis had nearly 50% higher average pension wealth than those only advised at the start.’ Benefits were greater for less-affluent investors, with a ‘just getting by’ group enjoying a 24% (£35,054) boost to their pension wealth across the ten year study period2.

Marathon not a sprint

Before investing, it’s important to establish a savings safety net and commit to investing over the long term, meaning at least five, preferably ten years. Historically, although investing in equities has delivered better returns than cash, there is inevitably a risk the value of investments can fall; we therefore need to establish your risk tolerance before recommending any investments. Whether you’re thinking about your pension, establishing an investment portfolio, a stocks and shares Individual Savings Account (ISA), or perhaps a Junior Individual Savings Account (JISA) for under-18s in the family; if you’re looking to make your money work harder this spring but need help getting started, we can help you begin your investment journey.

1UK Parliament, 2021

2ILC, 2019

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.