Savings v Investments

RG2015

Many savers think investments are too risky, and many investors think having too much in cash risks losing out to inflation. 

My question is why do people with large amounts of excess cash (ie > 3 - 6 months emergency cash) choose to save and not to invest?

El_Torro

I think you’ve already answered your own question: They’re too risk averse and don’t understand how to make volatility work to their advantage.

MX5huggy

Investing is complicated, paralysis of choice. No one can tell you what is best. You might go to a professional and loose everything. 

dunstonh

My question is why do people with large amounts of excess cash (ie > 3 - 6 months emergency cash) choose to save and not to invest?

Lack of knowledge and understanding is usually the main issue.   

Some may have tried investing in the past and gone in above their risk profile and made bad decisions and it put them off.

However, cash is also a good risk reducer for investing.  So, a cautious investor may use x% of their cash to offset the use of higher risk assets.

eskbanker

Uncertainty, fear, ignorance, denial....

Lack of understanding of what risk really means - there are so many who are under the impression that investment is risky but that cash savings are a safe no-risk option!

maxsteam

Many people test the water for investing (I presume that you are talking about investing in shares), lose some money then decide that it's not right for them. Other people make money with their first trade and then believe that they can beat the markets every single trading day.

Mickey666

RG2015 said:

Many savers think investments are too risky, and many investors think having too much in cash risks losing out to inflation. 

My question is why do people with large amounts of excess cash (ie > 3 - 6 months emergency cash) choose to save and not to invest?

Because they've already got enough?

Thrugelmir

If only investing was always guaranteed a return with no risk attached. No one cares who loses money as long as it's not their own. The longer a bull market runs the higher the level of complacency. After all what could possibly go wrong? 

where_are_we

We have a larger proportion of our wealth in cash compared to most, because we are helping our children get on the housing ladder (one bought their first house last year) and we don`t want to the risk of having to sell investments in a crash. We also don`t think gilts or fixed income products are good value so our investments are 100 % equities and the cash element is safe (we use regular savers etc to get a reasonable return). We are also pensioners and the perceived wisdom is not to be in 100% equities at our stage of life. The current trend (due to very low interest rates on cash) to promote equity investing (especially amongst young people with very little cash holdings) is risky. I do realise that over time investments perform better than cash.

noclaf

I first started investing over 10 years back.. or should I say gambling...unfortunately I started with AIM Oil & Mining shares...it was like the equivalent of crypto mania we see now with many speculating on shares/cryptos without really understanding why (except to hopefully make profit) and way beyond their actual risk tolerance. I got burned bad on AIM and it put me off investing for a while though I continued to dabble in individual shares for a while. I lost money in two ways, buying shares in rubbish companies that were not well run or at least where there was a lack of governance, buying and selling too often so not realising the full potential profit on shares and being hit with high trading costs due to the constant dipping in and out of shares.
About 3 years back I closed my shares a/c and as I began reading more opened a Vanguard a/c with monthly investing. This approach allowed me to rebuild my risk tolerance to market drops etc

 I've also reviewed all my pensions with the help of this forum and made tweaks where needed..and am v glad I did based on the improvement in performance of the funds.
10 years back I had no clue on index funds and etf's..my view of investing was limited to individual shares and I didn't have a clue about pensions or even considered them important,I  just buried my head in the sand and ignored it all. I am still learning and there is a lot to learn but from when I was a true newbie many years back I can understand why many choose the easy option of not trying to improve their understanding of investing and markets, hence they may not feel as comfortable with putting their cash into the market where there is higher risk of loss in the short term Vs cash. I have a number of friends and family who invest blindly into shares and funds, no thought process about allocation, wider market sentiment, politics, industry changes etc When the market dipped in March last year lot of them sold out so would suggest their were invested beyond their risk tolerance.

user1168934

noclaf said:

I first started investing over 10 years back.. or should I say gambling...unfortunately I started with AIM Oil & Mining shares...it was like the equivalent of crypto mania we see now with many speculating on shares/cryptos without really understanding why (except to hopefully make profit) and way beyond their actual risk tolerance. I got burned bad on AIM and it put me off investing for a while though I continued to dabble in individual shares for a while. I lost money in two ways, buying shares in rubbish companies that were not well run or at least where there was a lack of governance, buying and selling too often so not realising the full potential profit on shares and being hit with high trading costs due to the constant dipping in and out of shares.
About 3 years back I closed my shares a/c and as I began reading more opened a Vanguard a/c with monthly investing. This approach allowed me to rebuild my risk tolerance to market drops etc

 I've also reviewed all my pensions with the help of this forum and made tweaks where needed..and am v glad I did based on the improvement in performance of the funds.
10 years back I had no clue on index funds and etf's..my view of investing was limited to individual shares and I didn't have a clue about pensions or even considered them important,I  just buried my head in the sand and ignored it all. I am still learning and there is a lot to learn but from when I was a true newbie many years back I can understand why many choose the easy option of not trying to improve their understanding of investing and markets, hence they may not feel as comfortable with putting their cash into the market where there is higher risk of loss in the short term Vs cash. I have a number of friends and family who invest blindly into shares and funds, no thought process about allocation, wider market sentiment, politics, industry changes etc When the market dipped in March last year lot of them sold out so would suggest their were invested beyond their risk tolerance.

Whoa ... sounds like you are narrating more or less my story

OP - the answer above says it all .... simply put, most people just don't want to go through the process of learning.