Holding cash vs investing
While we should all save some of our money in cash for our short-term goals, staying invested could serve you better for the long term.
When markets are moving, it’s understandable that investors see advantages in keeping more of their wealth as cash. And, of course, it’s essential to have cash to hand as an emergency fund as well as important to keep cash for your short-term needs.
But history shows that stock markets tend to bounce back quickly from geopolitical crises like Ukraine. So, it could also make sense to stay invested not just when markets perform well, but during more challenging periods too. Pulling out when they fall could mean missing out when they recover.
Economic growth slows but continues
We’re still seeing growth in company cash flows and in the economy. In 2022, GDP is expected to expand by around 3.8% according to Office for Budget Responsibility (OBR).
Meanwhile, unemployment remains at near historic lows. Between November 2021 and January 2022 the rate was 3.9%, according to the ONS.
Keep the long term in mind
Investing for the long term could give you the best chance for growth. By the end of February, the FTSE 250 and the S&P 500 were higher than they were at the same point 12 months before, and they are 136% and 278% higher respectively than they were 10 years ago (as at 28 February 2022).
We all need cash savings but with interest rates currently far below inflation, keeping significant amounts in cash which could be invested might mean the overall purchasing power of that money declines in real terms.
Being invested, while of course still holding some independent cash, could be an effective way around losing the value of your money.
Learn more about investments
Whether you’re an experienced investor or just finding out what investing is, we’ve got a range of articles to help you understand more about investing.
We regularly update our articles depending on what’s happening in the market so check back for future updates.