30 August 2012

Should I ... Invest some of my cash savings?

This is the first in a mini-series of "Should I ...?" blogs - hopefully addressing some of the common questions which we have about our money.
I'm often asked how much you should keep in savings and how much to invest. Well, you should never leave yourself without some easy-access cash, but on the other hand you can have too much of a good thing! For many people, having something like a quarter to a third of their annual expenditure held in cash is about the right level. More if your income is uncertain, less if your circumstances are stable.
So if you have more cash than you need, should you be investing it? In most cases I would have to say "yes". There are caveats, of course, like being able to leave it alone for several years, and being willing to see ups and downs in value. But on balance, and over the longer term, history tells us it is better to be invested than to hold cash.
Where you should put it is a whole different question, of course. That depends on your attitude to investment risk, whether you are looking to take an income from it, and various other things. But a starting point for most people will be to use their stocks and shares ISA allowance to invest in funds. That will give you access not only to shares but also to other "asset classes" like property funds and fixed interest funds which will be less volatile than shares.

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