Allocating Savings and Investments and what risks to take depending on tolerance

jokerml1

Hi all, 

First post here

Keen to get your thoughts

I’ve been trying to get my head around how best to split money between different places and I’m curious how others approach it.

For example, a normal savings account like Chase pays around 4.75% right now, which feels safe but obviously WON'T beat inflation in the long run. Then there are high-yield savings accounts that can do a bit better, but still come with limits.

Beyond that you’ve got stocks, ISAs, and even riskier things like crypto — all of which can go up or down quite a bit.

The tricky part for me is figuring out how much to put where, depending on risk tolerance. I know in theory it’s about balancing short-term security with long-term growth, but it seems very personal in practice. Some people are comfortable having most of their money in investments that fluctuate, while others prefer the peace of mind of cash, even if it grows more slowly.

I’d really like to hear from people here: how do you judge what’s the right mix for you? Do you set a rough percentage split (e.g. X% in savings, Y% in stocks, Z% in higher-risk stuff like crypto)? Or do you decide based on specific goals and time horizons (like saving for a house deposit vs. retirement)?

Any thoughts welcome!

ColdIron

What is right for me could be wrong for you. It depends upon your objectives and circumstances

Are you 16 or 66? Are you single or married with children? Do you have a defined benefit pension or no provision at all? Are you employed or on benefits? Home owner or renting?

The list goes on and on

kempiejon

The idea of a percent split between different assets classes is often seen as a way of spreading the risk.
What percentages and which assets is personal. Each individual will be different and annoyingly those individuals might well not know their own risk tolerances and when faced with the practicalities of market risk are stressed.
The well worn adage is you need to able to sleep at night.

Eyeful

Follow the KISS (Keep It Simple Stupid) method.

1. Any money needed within 5 years should be in a savings account or Premium Bonds.
2. Use tax shelters wherever possible ( Pension, Cash ISA, Stocks & Shares ISA)
3. Have an emergency savings account, which will cover household bills for 1 year 
4. For money you will not touch for at least 10 years, consider putting into either
(a) Passive Low Cost Global Index Tracking Fund or ETF 
(b) Low Cost Multi Asset Fund with a share/bond split that suites your own risk tolerance.
5. Never invest in something you do not understand.
6. Investing in single shares is very risky. Better to keep to funds or ETF's.

Remember
Investing means putting your money at risk
The correct share/bond/other split, is what will allow you to sleep at night and not worry about your investments.

Following may be of interest to you:
https://www.kroijer.com/
https://monevator.com/passive-fund-of-funds-the-rivals/
https://www.biglawinvestor.com/meet-the-gotrocks-family/

Albermarle

It sounds like you have the general idea of how these things work, so you are already ahead of more than 90% of the population.
However the 'split' you decide on is a personal one, and as we can not see into the future you never know whether it is the right one.

Ch1ll1Phlakes

As said above. How you split your money is up to you. 

For me, as someone relatively new to investing, I only assign a small portion of my funds to investments at the moment (roughly 2-4%) though I aim to increase this as I get more comfortable with the terms and working of investments. With this in mind I have no absolutely high risk investments such as crypto. My long term goals are for a healthy retirement so investing with definitely be a long term strategy but not until I have my housing situation sorted.

On the other hand, I'm very comfortable with savings and am always moving my cash savings to higher interest rate accounts, whether that be regular savers or a new easy access account after a rate reduction. I have many accounts on the go at all times but I actually enjoy managing my funds across different providers.

You seem relatively well versed compared to the vast majority of the public so against the choice is yours. If your want to keep things simple stick to a few providers or if you're happy with the work of maintaining multiple accounts to get the best offers and interest rates on your cash or try out different investment platforms feel free. 

As mentioned above by @Coldiron , your personal situation is key. Your age, salary, housing situation etc. will all play a role in how your split your money. All the best with your financial journey.

jokerml1

ColdIron said:

What is right for me could be wrong for you. It depends upon your objectives and circumstances

Are you 16 or 66? Are you single or married with children? Do you have a defined benefit pension or no provision at all? Are you employed or on benefits? Home owner or renting?

The list goes on and on

Hi this is great info! 

Appreciate that - I'm 32, single, no kids, Self Employed, Renting... etc. so yeah but would be great to hear your current split between savings and investments etc. if you don't mind of course   

jokerml1

kempiejon said:

The idea of a percent split between different assets classes is often seen as a way of spreading the risk.
What percentages and which assets is personal. Each individual will be different and annoyingly those individuals might well not know their own risk tolerances and when faced with the practicalities of market risk are stressed.
The well worn adage is you need to able to sleep at night.

Well said! Entirely up to the person then 

Out of interest, what is the riskiest investment you have? 

jokerml1

Ch1ll1Phlakes said:

As said above. How you split your money is up to you. 

For me, as someone relatively new to investing, I only assign a small portion of my funds to investments at the moment (roughly 2-4%) though I aim to increase this as I get more comfortable with the terms and working of investments. With this in mind I have no absolutely high risk investments such as crypto. My long term goals are for a healthy retirement so investing with definitely be a long term strategy but not until I have my housing situation sorted.

On the other hand, I'm very comfortable with savings and am always moving my cash savings to higher interest rate accounts, whether that be regular savers or a new easy access account after a rate reduction. I have many accounts on the go at all times but I actually enjoy managing my funds across different providers.

You seem relatively well versed compared to the vast majority of the public so against the choice is yours. If your want to keep things simple stick to a few providers or if you're happy with the work of maintaining multiple accounts to get the best offers and interest rates on your cash or try out different investment platforms feel free. 

As mentioned above by @Coldiron , your personal situation is key. Your age, salary, housing situation etc. will all play a role in how your split your money. All the best with your financial journey.

Thanks for this reply! Appreciate the honesty, have you ever looked at high-yield accounts?

As I told @ColdironI'm 32, single, no kids, Self Employed, Renting

I wonder if you'd get in to something more risky for a higher yield? 

jokerml1

Albermarle said:

It sounds like you have the general idea of how these things work, so you are already ahead of more than 90% of the population.
However the 'split' you decide on is a personal one, and as we can not see into the future you never know whether it is the right one.

thanks I am trying to be savvy as possible - I wonder how you split things up yourself? 🙏

jokerml1

Eyeful said:

Follow the KISS (Keep It Simple Stupid) method.

1. Any money needed within 5 years should be in a savings account or Premium Bonds.
2. Use tax shelters wherever possible ( Pension, Cash ISA, Stocks & Shares ISA)
3. Have an emergency savings account, which will cover household bills for 1 year 
4. For money you will not touch for at least 10 years, consider putting into either
(a) Passive Low Cost Global Index Tracking Fund or ETF 
(b) Low Cost Multi Asset Fund with a share/bond split that suites your own risk tolerance.
5. Never invest in something you do not understand.
6. Investing in single shares is very risky. Better to keep to funds or ETF's.

Remember
Investing means putting your money at risk
The correct share/bond/other split, is what will allow you to sleep at night and not worry about 

Wow this is some great info! I wonder how you learned all this? 

Appreciate the detail - How do you feel about higher yield savings accounts and Crypto?

Where do you participate in ETFs and how much do you pay in Fees? 

Any thoughts would be great : )