Savings v investments - what’s a good proportion of each?

kempiejon

Savings might be money I expect to be spending in the next few years, fixed, regular and variable savings but a finite amount would be a cap, perhaps a multiple of annual expenditure. I have about 2% cash in my SIPP and similar %age in my ISAs.

The majority of my investments are mostly in geographic focused ETFs and equities, less in corporate and government fixed interest, and income focused Investment Trusts oh, a bit of gold/precious metals,

eskbanker

Savings might be money I expect to be spending in the next few years…

That's certainly a sensible approach favoured by many, i.e. decide when money would be needed and use that as the basis for distinguishing between saving (short term) and investing (long term), rather than aiming for percentages.

subjecttocontract

Its not a level playing field is it ? Just take pensions......someone with a final salary pension where their company have invested contributions compared to others with a private pension and all the combinations in between would produce many different spreads. Any answer from anyone is totally meaningless except to the individual providing it.

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/81995657#Comment_81995657

Where you invest matters.

Investing in a short-term money market fund is investing.

Investing in a fund focusing in Pharmaceutical companies is investing

However, they are very different investments, and the level of cash you would retain with each would be different. (along with objectives, timescales, knowledge, behaviour and risk profile).

There is insufficient information in your posts to relate the level of cash you could be looking to retain.

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/81995657#Comment_81995657

I have 6+ months of regular expenses in easy access cash, about the same in commodities, a bond ladder worth a bit more than those that runs from short to medium term, and the remainder in equities. Basically tailored around the easy access and plan to use whichever asset class is performing best (or least worse) to top that up if required. As far as income proportions go it's the same idea - ensure the EA is full, then the other feeder assets are maintained, and the rest goes into equities. That doesn't perfectly map to a savings vs investments categorisation - equities obviously investments, and cash obviously savings, but the bond ladder sort of straddles both.

Linton

The best allocation is the one that most closely reflects your objectives in terms of how much cassh you will need in the future and when. Other people may have diffierent objectives.. You need to take into account the balance between low risk lower return from savings and the higher risk higher return from share based investments.

Investments are not suitable if you are likely to need the money in say less than 5 years because although their long term trend is upwards at a higher rate than savings, in the short term values can be very volatile.

Conversely, although currently savings rates are higher than inflation, over extended time periods they can be lower. It would not be rational to put your money into long term savings if it were likely that by the time you needed the moeny the value would have decreased significantly in real terms.

SpeedSouth

I have a savings pot/emergency fund that as others have said equates to about 6 months spending. That's ready accessible cash across a mix of accounts.

All my other money sits in investments. All 100% equites of some description across ISAs and Pensions.

The savings only accounts for about 5% of the complete total. But then I'm in my 40s so still in accumulation phase, and have no planned spending that I account for. Holidays/DIY/ANO come from regular income.

When the next car is needed I'd raid the savings, and dial back the investments for a period until the emergency fund is back where I want it.

Of course when I'm retired/nearing retirement that allocation will differ greatly id imagine

jimjames

https://forums.moneysavingexpert.com/discussion/comment/81995586#Comment_81995586

95% investments, 5% cash. No need for much cash buffer but other people will have different requirements.

LHW99

Roughly 50 : 50 plus an emergncy buffer.

HedgehogRulez

£100 in savings, square root of minus one in investments