One in three investors sitting on cash ahead of EU referendum
The overriding view on the EU referendum re: the UK possibly leaving Europe in all the press, including Moneywise, is one of uncertainty. Simply put, nobody really has a clear idea what will happen if we leave – both in the short-term and the long-term.
But you don’t need to take the word of just the press – a recent survey carried out by Moneywise’s parent company Interactive Investor shows that one in three investors – so people who would otherwise invest money rather than save it – are keeping hold of cash while they wait to see what happens.
The poll asked over 9,000 private investors, 31.2% of whom said that the referendum had an impact on their decision to invest.
This could represent an investing opportunity – as Rebecca O’Keeffe, head of investment at Interactive Investor says: “The number of investors sitting on cash represents a significant amount of liquidity that will be looking for investment opportunities should the EU referendum result go the right way for markets. In contrast, a vote to leave could hit the market as a nasty surprise.
“With the Federal Reserve decision due on 15 June and the EU referendum a week later, the prospect of increased volatility over the coming weeks is all but certain. However, this should provide significant opportunities for active traders and engaged investors who may be able to capitalise on this uncertainty.”
With interest rates continuing at their all-time low, many people are starting to look at investing over saving. Equity income investment funds offer higher annual incomes of 3% or more and have the potential to grow your capital, alongside the risk of losing it too.
In fact, stock broker Selftrade found in April that a massive 62% of savers keep their money in cash only – which equals £735 billon in total. While cash is a safer home for your money, you’re also throwing away the chance to grow your wealth over the long term. The average annual return on a cash Isa since 2011 was a measly 1.86%, according to March 2016 research from Prudential.
- Read Moneywise’s best cash Isa rates this week.
Richard Donegan, director of Selftrade, says: “If you are looking at the stock market for the first time don’t be put off by recent market conditions. No one can predict with any degree of certainty, which way the stock market will move at any given time; but history shows that if you are investing over the long term, shares (or equities) are one of the best long-term investments in the financial market place. They tend to outperform government bonds, corporate bonds, property and many other types of asset, most particularly cash”.
The research from Selftrade also showed that 25% of people are put off investing because they don’t understand the stock market. If you count yourself among these people, our Coffee break investment guide will get you on the right track.
The term is interchangeable with stock exchange, and is a market that deals in securities where market forces determine the price of securities traded. Stockmarket can refer to a specific exchange in a specific country (such as the London Stock Exchange) or the combined global stockmarkets as a single entity. The first stockmarket was established in Amsterdam in 1602 and the first British stock exchange was founded in 1698.
All investment returns are measured against a benchmark to represent “the market” and an investment that performs better than the benchmark is said to have outperformed the market. An active managed fund will seek to outperform a relevant index through superior selection of investments (unlike a tracker fund which can never outperform the market). Outperform is also an investment analyst’s recommendation, meaning that a specific share is expected to perform better than its peers in the market.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).