The coronavirus pandemic limited the spending power of many people in the UK, meaning people have been able to save.
But some are now arguably sitting on too much cash.
Quilter surveyed over 2,000 Brits and found 18% of those with £250,000 ($331,306, €279,935) or more in investable assets have 40-60% in cash, or at least £100,000.
This group has also benefitted from the lockdown, as 36% said they have more money to invest than usual.
Losing
However, by leaving the money sitting in cash this group is losing out on potentially substantial returns.
The rates of return on cash accounts are extremely low and plummeted even further since the coronavirus outbreak, with the average currently below the rate of inflation.
The research reveals this group is aware of the opportunities.
Some 29% would like to move their cash to investments but don’t know what to do, and 37% said they will be more active with their investments overall.
Olivia Kennedy, financial adviser from Quilter Private Client Advisers, said: “Every investor needs a cash buffer in case of emergencies, but too much can negatively impact on returns. A good rule of thumb is save six months of your salary in cash and then invest in a spread of different assets that can deliver a long-term return.
“For wealthier people it is important to do this tax efficiently. Make sure you make the most of your allowances, including the ISA allowance and the pension allowance. Speaking to a financial adviser can often identify the best ways to make the most of your cash and ensure it can deliver for you over the long-term, and not make your goals out of reach.”
Risks
Jonathan Raymond, investment manager at Quilter Cheviot, also discussed the risks of holding onto too much cash.
“Historically, 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,” he said. “This is particularly acute in the current environment where deposit rates on cash have tumbled and with inflation likely to accelerate into next year.
“Individuals with excess cash balances should strongly consider investing to help protect and grow their capital.
“Investing does of course carry its own risks, but a well-structured and well-diversified portfolio tailored to individuals’ requirements and managed sensibly ought to protect capital from inflation and the decline in the purchasing power over time.
“Seeking professional advice might also be a sensible option so that individuals can have a globally-diversified and broad-based investment portfolio built for their needs without having to spend lots of time researching the whole of the investment universe for appropriate investments.”
