According to the Platforum UK Fund Distribution Annual Review for 2023

https://www.platforum.co.uk/uk-fund-distribution/a-bumpy-ride-for-the-2tn-uk-retail-investing-market

the amount of money invested by individual UK investors was £2.25 trillion. This doesn’t take into account additional cash savings, Premium Bonds and workplace pensions which adds a further £2.45 trillion making a grand total of £4.7 tn. By any measure that’s a substantial amount of a lot of money.

 

About £1.7 tn was invested in cash and cash equivalents.

https://www.statista.com/statistics/445771/savings-accounts-balances-united-kingdom/

Whilst it makes sense to have some money invested in cash, in my opinion, that’s far too much. Why do I make this assertion?

 

Well the level of share ownership in the UK is just 14% whereas in the US it is 61%. Of course, the US has always been a country of share ownership. Why is this? Well, it is the land of opportunity. A country which has historically attracted immigrants who wanted to improve themselves and took risks to achieve the so-called American Dream. Maybe it’s just part of the American psyche. I don’t know.

 

What I do know is that the British pound has lost a significant amount of its value in real terms over the years. Since 1971 it has lost 90% of its value! Go back a hundred years and it has lost 99% of its buying power.

 

On the contrary real assets such as shares, property and gold have at least maintained their value over the same time period. The New Liberty Standard Exchange recorded the first exchange of Bitcoin for dollars in late 2009. Users on the BitcoinTalk forum traded 5,050 bitcoins for $5.02 via PayPal, making the first price mediated through an exchange a bargain basement price of $0.00099 per bitcoin https://www.bankrate.com/investing/bitcoin-price-history/#:~:text=The%20New%20Liberty%20Standard%20Exchange,price%20of%20%240.00099%20per%20bitcoin. The rise in value of Bitcoin has been extraordinary over the last 15+ years.  It has risen in value by 235% a year since inception.  Over the last 5 years alone it has risen in value by 766% meaning it has grown significantly more than the rate of inflation.

 

So whatever you invest in, make sure it has the potential to at least match inflation in order to preserve the purchasing power of your money. Cash in the bank has proven to be a very poor investment historically so you shouldn’t keep too much of it. It’s not an investment and it will fail to retain its value in inflation adjusted terms.  Basically, it will make you poorer in real terms. You know it makes sense*.

 

*RISK WARNING

The value of investments can fall as well as rise. You may not get back what you invest. The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction.

Bitcoin is a high risk investment. Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you are unlikely to be protected if something goes wrong.

All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. The Financial Conduct Authority does not regulate tax planning, estate planning, or trusts.  This blog is based on my own observations and opinions.