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Market value

I have built up some reasonable savings in cash. With interest rates being so low and stockmarket values being down, is now a good time to switch this money into shares?

Due to the economic situation with low interest rates that are giving savers very little return for their money and the continued speculation and fears about banks many people are looking to move their cash savings elsewhere.

The stockmarket is depressed and values are down. Many people think there are further losses on the way before any recovery can start to take place. But calling the bottom of the stockmarket in value terms is very hard and many people are now admitting there are shares that are very good value at present.

Even if values do drop further before recovering, buying in now could result in very good gains over the longer term. However, the most important wording here is longer term.

The answer to your question will, as always, depend on your wants/needs and how much risk you are willing to take with your savings.

If you have been receiving financial advice on a regular basis and you have given your adviser full information on your financial situation, you should together have come up with an overall plan and asset split, that is, how much money you are/should be holding in different types of assets such as cash, shares, etc.

The main consideration, before jumping in to invest money in the stockmarket, should be how this would change the split of your asset holdings and whether this is acceptable to you in terms of your risk profile and your wants/needs. If you have built up your cash savings for rainy day money and this is still the need, I would tend to suggest you remain in cash deposits. However, if you have been putting your money aside for a longer-term purpose or because you did not think stockmarket investment was appropriate previously and are happy to take some risk for potentially higher returns, now could be the time to take the plunge.

If you decide on the shares’ route, you can invest via collective investments rather than individual shares in order to benefit from a pooled investment fund with more potential to diversify.

There are other options for your money, it is not just a case of cash versus shares. The best bet is generally a varied portfolio which may also include investments such as corporate bonds. These have performed fairly poorly over the last year or so but there seems to be a more positive attitude towards them now and they could give reasonable returns over the next few years, although there is an element of risk, especially in terms of default rates, and the value can go down as well as up.

As with all financial decisions, I suggest you talk to a professional adviser about the options and the best route for you, as they can make an informed recommendation based on your particular circumstances. They can also assess your appetite for risk, as being able to tolerate the downsides is a very important part of any investment strategyIf you are fully aware of and able to tolerate such risk, now could be a very good time to start moving your money.

Emma Duncan is a director of Thameside


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