Digital wealth manager Nutmeg has launched a 100 per cent cash option for its stocks and share Isa and general investment account, with the facility for customers to “drip feed” into other asset classes when they are ready to invest.
Nutmeg says its research has found 11 per cent of savers do not invest because they don’t know where to start, and a similar number do not think they would know what investments to pick.
Customers will now be able to open a 100 per cent cash pot and then make regular contributions to an investment pot of their choice through a new drip-feeding feature, which is available through the stocks and shares Isa and general investment account.
The firm says the feature is not a cash Isa, and is not intended to be a long-term savings solution. The cash held within the stocks and shares wrapper will count towards Isa contribution limits for tax purposes.
Nutmeg head of financial advice Lisa Caplan says: “We’re still seeing too many people leaving money sitting in cash, when investing could be right for them if they had a little help getting started. In times of market uncertainty, like we saw during 2018, it can be tempting to leave money in cash accounts. Sticking to cash seems safe, but it’s a mistake to view it as risk-free. The impact of inflation means those who opt solely for cash risk putting themselves at a disadvantage, as the real value of their money will be eroded over time. Moreover, history shows that over the long-term, stock market returns are higher than cash.
“If you’ve got enough cash savings to cover emergencies and a few months’ expenditure and you’re considering setting money aside for a longer period of time, then investing might be right for you. Our new feature allows customers to start with a 100 per cent cash option, and then slowly drip-feed money into an investment that meets their risk tolerance, giving them a chance to benefit from pound cost averaging and the potential higher returns of investing in the stock market.”