Time to Switch from Cash to Markets
Published / Last Updated on 25/02/2020
January 2020 Consumer Prices Index CPI has ticked up to 1.3%pa to 1.8%pa and Retail Prices Index RPI up from 2.2%pa to 2.7%pa.
So a 0.5% increase in a month – that means your cash is worth 0.5% less than it was a month ago.
If you are getting 1% or 2% interest on your cash savings your money is devaluing.
There are only 21 of 331 bank/cash savings accounts analysed by money facts last month that are now beating CPI at 1.8%pa (1.3%pa last month) – but what about real inflation, in our opinion that is RPI because we all have housing costs?
RPI includes the costs of housing (mortgage interest costs, rents and council tax for example) is up from 2.2%pa to 2.7%pa with Best fixed rate currently paying 2.15% - none apart from the odd Children’s ISA and regular savings headline at 3.0% - but given regular savings spread over 12 months – that’s only a real average interest across your whole portfolio of 1.64% - still below RPI at 2.7%.
Is it time to think long term stock market related investments?
Even if you are risk averse, if you have any savings that you may not be planning to access in the short term (5 years) but plan to access in the medium or longer term 5yrs+, 10yrs+, then perhaps you can afford to take some risk for long term growth to beat cash rates and/or inflation?
Stock market % returns are based upon the following indices FTSE 100, US Dow Jones, German Dax, French CAC, China Shanghai Composite, Hong Kong Hang Seng and Japan Nikkei Dow for 22.8% growth in 12 month from period lowest prices to close on 21/02/2020 and 9.94% in 6 months from 09/09/2019 to 21/02/2020.
