Today’s low interest rates could spell trouble for those who are saving for the future in cash.
The belief that investing is difficult means too many people still rely far too heavily on cash savings for their long-term finances, despite the hazards that low interest rates present to our long-term financial security. In conducting our recent Saver to Investor survey, we questioned 6,000 people across 10 European countries with the aim of learning why.
Our survey, conducted in January 2021 revealed that only three in 10 men invest regularly. That number drops to one in five for women, with nearly a quarter of women aged 45-60 saying investing is something they wouldn’t even consider.
Among the main reasons why so many savers do not invest is a strong perception that investing requires a lot of commitment, as you’ll need to keep a close eye on how your investments are performing. Many people think that investing is a complex pastime, or that it’s no different from placing a bet. In truth, getting started with investing is much less daunting than you think.
1. You don’t have to do lots of research to start investing
Our study revealed that flexibility, accessibility and the ability to invest smaller amounts regularly were the main attractions of cash savings. In contrast, investing is associated with complexity and gambling, and something you need to keep a close eye on.
Investing is perceived as challenging for many
Beliefs associated with investing, percentage of respondents
These are timeless challenges, and as such have been thoughtfully addressed by the investment industry. Pooled funds, in which a sum of money from numerous people is invested into a fund managed by a professional investor, can be a great place to begin. In fact, you may already invest in one as part of your pension savings. These are ready-made diversified portfolios with holdings of varying risk levels (for example, equities and more traditionally steady bonds) that are actively managed to reflect the prevailing market backdrop.
2. You don’t have to be an expert to achieve financial independence
64% of women non investors and 57% of men non investors said worries over complexity was a main challenge to investing. But a diploma or degree in economics is entirely unessential to be able to invest successfully. The important thing is to have a clear plan of your objectives and a firm idea of how long you have to achieve your financial goals (such as retirement or the down payment on a home). And if it is experience you’re after, the burden doesn’t lie solely with you: as mentioned above, a clear advantage of choosing a professionally managed investment vehicle over a savings account is that financial professionals are there to manage your investment through changing markets.
3. You don’t have to be rich to invest
It’s a common misconception that you need a large lump sum to invest. Risk is an often-cited reason for not investing, as it’s mentally linked with not having enough money to make the process worthwhile, or to cover a worst-case scenario. Almost three-quarters of women and approximately 67% of men said they were unwilling to invest because they didn’t want to risk their money. In fact, 60% of people who don’t invest associate the practice with gambling. In reality, you don’t need to be wealthy. For as little as €25 a month you can access the benefits of investing through a regular savings plan, which means you can invest any cash you may have left over each month, no matter how small. And savings plans can also help to smooth market fluctuations, as you will buy more shares if markets fall, while your investments will be worth more when markets rise.
Get started with investing with our Saver to Investor guide
These are just three of the reasons why the transition from saver to investor can be much more seamless—and much less intimidating—than most people realise.
Read on to learn more about how even a novice investor can build an investment portfolio, and in turn, aim for a better future.