Is having 0% of your savings as cash silly?

sambessey

Hi

I am 24 with no mortgage, no debt (except student loan), and secure job paying an above- average salary. I save £1,000 most months, but always stick it straight into the stock market- (Estimate over £14K right now) either as part of an ISA wrapped HYP, or AIM stocks (Admittedly my ISA is looking pretty pathetic right now as AIM seems more exciting & profitable). I also have about £9,000 in various ISA- wrapped stock tracker funds.

In this day and age of rising interest rates and increasing uncertainty over the US economy, am I unwise to continue to throw 100% of my cash into stocks? I would estimate I am currently running at about £4-5K asset apreciation since about September, and am generating about £700 PA in dividends now, but having only ever experienced a blue market, am I being very silly by continuing to invest like this, or should I be sticking to what works for me?

sambessey

I appreciate that, but I can sell stock whenever I want, so effectively can have the cash readily available.

JDinho

sambessey wrote: »

I appreciate that, but I can sell stock whenever I want, so effectively can have the cash readily available.

Depending on what and how many AIM stocks you have it might not be so straight forward and the price you get might suffer.

Lazy_Runner

The problem is that stock markets crash and you may be worth less than you put in. This is compounded by the fact that at this stage everyone withdraws their money further depressing stock prices.

My strategy is to save 20% of my investment income/gains in a never to be touched savings account. This way if things do go pear shaped, I won't have lost all my money.

If possible, why don't you save all your dividends and also pay 20% of the money you are putting away, into savings accounts? This will give you a little cushion in case of future uncertainties.

My caution stems from the fact that I believe there is no such thing as a secure job. Private sector companies look after their shareholders and not the employees.
Public sector organisations do make people redundant when policies/politicians change (as has happened recently).

HTH

cheerfulcat

sambessey wrote: »

I appreciate that, but I can sell stock whenever I want, so effectively can have the cash readily available.

But you don't want to be a forced seller. Best to keep some of your savings in cash for emergencies.

zag2me

I do 50% cash 50% stocks, works for me. The cash generates a reasonable income and the stocks and shares a very nice one as well, but I am totally mindful that the shares will go down at some point as well.

jamesd

sambessey, you'll get greater returns on the investments but you still should have some cash so you don't have to sell during a bear market when you're between jobs, for example.

From what you write it doesn't look as though you have much non-UK exposure and that's where some of the really high growth can be found, probably more than the UK for the future.

A stock market fall just means that you'll be buying more cheaply while it's down, so there's no need to be greatly concerned about it unless you have some timetable which requires withdrawing money at a specific time when the markets could be low.

gt94sss2

Yes - as others have indicated what you are doing is 'silly'

Its a very wise precaution to keep 3-6 months salary in a easily assessable savings account to cover any unexpected bills/emergencies.

You don't want to be a forced seller of shares just to raise funds - thats not a good position to be in.

Also, as you say, you have never experienced a bear market - what would you do if the stockmarket fell 40/50% and for instance, you wanted to buy a house?

Regards
Sunil

sambessey

I am exposed to foreign markets in the sense that I focus a lot of my investment on quality Chinese AIM issues- so not exactly foreign, but I got stung last time I was invested in the US- the £-$ ratio changed quite a lot whilst I was in and a lot of my profits were gone as a result, so that put me off a bit. I think the Yen has some way to go against the £ though, so wonder if I should look at some of the Nikkei- listed blue chips?

Perhaps I should look to put £2,000 into something other than cash like gold and a further £1,000 or so as cash? The economic circumstances that would cause a crash in the stock market (and potentially me to lose my job) are quite likely to cause the price of Gold to surge in my opinion, so could this be a viable strategy?

I want to try and avoid the easy option of just cash as I am not the kind of person who intends to spend their life being an employee and making someone else / some bank rich, so I am trying to 'think outside the box' and take actions to make myself more money at the same time as cover myself- risk is a factor, but given my age and the fact I have no dependents or real financial commitments I feel I can take on more risk.

Thanks.

ukdutypaid

sambessey wrote: »

I focus a lot of my investment on quality Chinese AIM issues-

Wow...... Some balls there... I've only just become financially viable at 35+

No shares yet either... Time for an isa at least I suppose.

Lol...

cheerfulcat

sambessey wrote: »

Perhaps I should look to put £2,000 into something other than cash like gold and a further £1,000 or so as cash? The economic circumstances that would cause a crash in the stock market (and potentially me to lose my job) are quite likely to cause the price of Gold to surge in my opinion, so could this be a viable strategy?

I want to try and avoid the easy option of just cash as I am not the kind of person who intends to spend their life being an employee and making someone else / some bank rich, so I am trying to 'think outside the box' and take actions to make myself more money at the same time as cover myself- risk is a factor, but given my age and the fact I have no dependents or real financial commitments I feel I can take on more risk.

A crash in the particular corner of the market which you seem concentrated in - Chinese AIM traded stocks - does not require wider economic circumstances to change. Just as with the dot.com crash, it can come simply from massive over-valuations in the specific market. So an automatic rise in the price of gold is not a given.


You need to look at the quality of the risk you are taking. The AIM is very lightly regulated; much of the risk there is not so much market risk as risk of , shall we say, misbehaviour...