I think I've finally cracked why most people don't invest in the stock market

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81857953#Comment_81857953

However holding money only in cash accounts long term is a risky strategy, because the value is slowly eroded by inflation.

In the last couple of years saving rates have been not too bad and ahead of inflation, but on average in the long term they lag behind inflation and far behind stock market returns.

For example a popular ,medium risk multi asset fund, such as Vanguard Life Strategy 60, has increased in the last 10 years by almost exactly 100% ( so doubled).

Inflation over that 10 years has been 33%.

Average cash savings return over that 10 years ( assuming you shop around for decent rates) about 28% ( remember pre Covid cash savings rates were much poorer than they are today.)

So an average loss in real value for savings, of around 0.7% per year, and a real gain for the investment of 3% pa

If the investment had been a riskier global index fund as mentioned by the OP, the real return would have been more like 20% pa . Although very long term that is higher than you would normally expect, it has just been a very good 10/15 years for investing.

Flugelhorn

https://forums.moneysavingexpert.com/discussion/comment/81857999#Comment_81857999

I am sure there is the possibility to do better but having been "bitten" twice then we are reluctant to risk it again. Having said that I have a bit of pension that is in stocks and shares but can't get at it owing to McCloud / TTFAC and various other joyous things that make life so complicated

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81858107#Comment_81858107

Understandable.

Most human beings 'suffer' from 'Loss aversion'

It means losing hurts more, than the pleasure gained from winning.

oldernonethewiser

https://forums.moneysavingexpert.com/discussion/comment/81857884#Comment_81857884

Different people have different mindsets and different views. Being aware of that helps understand many things.

somerandomusername

https://forums.moneysavingexpert.com/discussion/comment/81858107#Comment_81858107

Thank your lucky stars you can't get access to it. You'll be so thankful you were not allowed to touch it until the required age.

Flugelhorn

https://forums.moneysavingexpert.com/discussion/comment/81858250#Comment_81858250

I am well beyond the "required age" and still can't get at until I have a McCloud remedy and the magic TTFAC, I'll be over 70 by the time they get their act together.

somerandomusername

https://forums.moneysavingexpert.com/discussion/comment/81858654#Comment_81858654

Oh I see. I thought you were like 40 years old or something. So yeh considering your age I definitely agree a savings account is far safer than keeping it in stocks.

Ectophile

https://forums.moneysavingexpert.com/discussion/comment/81857819#Comment_81857819

Have you seen what's happened to the price of gold recently?

But I wouldn't touch cryptocurrencies with a bargepole. They are not even fiat currency.

Murphybear

https://forums.moneysavingexpert.com/discussion/comment/81857953#Comment_81857953

I bought a few shares in the leisure industry. Sadly they crashed when Covid happened. I’ve still got them, they have increased in value now. I put most of my savings into Premium Bonds, I’ve done quite well out of them 😺

somerandomusername

https://forums.moneysavingexpert.com/discussion/comment/81859346#Comment_81859346

Historically over the long term gold has been a terrible return on investment compared to stocks. It's not really helpful to cherry pick specific short time periods and say "look it's doing amazing better than x and y therefore it's a reliable long term investment"

In terms of investments I would rate them like this.

Stocks

Real Estate

Gold

Bonds

Commodities

I don't include crypto in this list because I fundamentally do not believe it's an asset class because it quite literally generates nothing and returns nothing of value. It's the same reason I don't classify a roulette table or the lottery as an asset class.