There is a real danger for these people and it comes in the form of investment risk. In the heady days of 5 per cent interest rates, it was a no brainer for many people to avoid the shocks and scared of the equity market and simply stuff their cash into deposit-based vehicle and simply let the interest generated provide some income, albeit with a potential tax liability on some of it.
The brave new world of the post-Brexit vote in 2016 has thrown up a real conundrum for these investors. While all the news was bad and fear was everywhere, the UK market and others elsewhere around the globe have recovered from the initial shock and for the most part bounced back and indeed made some upside gains.
What I suspect will happen is that those people who have adhered to a cautious view on their investments will inevitably have their attention drawn towards equity investing to achieve their goals, while not necessarily fully grasping the risk therein.
The value and levels of the UK equity have been further challenged recently, with the circus masquerading as the US Presidential elections, but interestingly enough have by and large ridden the tide of misinformation and rhetoric and shaken off the Trump Pence factor and continued with business as usual.
How this will impact on the make-up of investors’ portfolios and the balance between bonds and equities is really tough to call, but I suspect that the ongoing depressed levels of interest rates on both sides of the Atlantic will push more people into the active strategy funds and reduce over-reliance on fixed-interest.
Nick McBreen is an independent financial adviser at Worldwide Financial Planning
Key points
Many investors and savers alike have been forced to re-think their strategies when looking for income.
Savers’ deposit capital is effectively yielding in negative territory.
There is a real danger for investment risk.
