The pitfalls of not investing in equities
Chris Broome – Chartered Financial Planner
Investing your hard-earned money can be, at times, a confusing experience.
Do I simply hold my money in cash?
I hear gold is a good commodity, isn’t it?
What about investing in buy-to-let property?
Or, the stock market, but isn’t that high risk?
Today’s article focuses on the last point.
What are the pitfalls of NOT investing in the stock market (otherwise known as equities or the Great Companies of the World):
1. Missed opportunity for growth:
Equities have historically provided higher returns over the long-term than other asset classes like bonds or cash. By not investing in equities, individuals may miss out on potential growth opportunities for their money.
2. Inflation risk:
Inflation can erode the purchasing power of cash over time. By not investing in equities, individuals may be more susceptible to inflation risk, as the returns on cash may not keep pace with rising prices.
3. Lack of diversification:
Investing solely in cash or other low-risk assets can lead to a lack of diversification in one’s investment portfolio. This can increase overall risk and potentially lead to lower returns.
4. Opportunity cost:
The opportunity cost of not investing in equities can be significant. Money that is not invested in equities may be earning lower returns than it could be if invested in equities.
5. Retirement shortfall:
Without investing in equities, individuals may not be able to accumulate enough wealth to meet their retirement goals. This can lead to a retirement shortfall, which can be difficult to make up for later in life.
In summary
Overall, not investing in equities can be a missed opportunity for growth and can increase the risk of financial insecurity over the long-term.
It’s important for individuals to consider the potential benefits of investing in equities as part of a well-diversified investment portfolio.
Next steps
If you have any questions about any of the above, or wish to discuss your long-term financial plans with us, please get in touch. Contact us
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investment can go down as well as up and you may not get back the full amount you invested.
Past performance is not a reliable indicator of future performance.
