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Why are Brits the worst investors in Europe?
Lina Bivainyte
May 21, 2024
Have you seen these disclaimers and warnings for various investment products?
‘Your capital may be at risk!’
'You may not get back all of your original investment!!’
‘Risk level 11 out of 10!!!’ 🫨
Has it put you off any kind of investing? If it has, I wouldn’t blame you, because it has definitely impacted the way I viewed investing previously. NOT FAVOURABLY!
After I’ve seen all the warnings
Who would want to risk their money like this? 🙅♀️
It seems that in the UK, we have high regulatory barriers when it comes to investing and investment products. Some are there for a good reason (i.e. crypto and CFDs), but a lot of other investments shouldn’t come with these shouty warnings.
It’s no surprise that Brits don’t invest much and are the in fact the worst investors in Europe sitting on 1.8 trillion in cash savings. Some of this money could be better used for investments where at least long term we could beat the inflation.
According to CPS (Centre for Policy Studies), we only own 21% of stocks and shares, which is the lowest proportion in Europe. To compare, some of our neighbours invest far more - France 28%, Germany 30%, Italy 34% and Spain 84%.
We’re clearly too cautious with our investing approach and the regulation in this country has something to do with it.
Most investment products have more warnings than gambling -
‘buying shares is treated by the regulators as a more dangerous pursuit than gambling – and high street banks are discouraged even from suggesting that their customers might benefit from moving their savings into shares’
We really need a change and a review because not only we are getting poorer compared to our neighbours, but we are also missing out on opportunity to get ahead.
Not all investments are equal in risk. Some are so well diversified, that even when investing in a fund made of only stocks, the risk level isn’t what some of these warnings make it.
For example, if we look at some of the passive global equity funds, Vanguard LifeStrategy100% would have the following:
7,016 holdings/stocks - it’s not investing in a single company, but more than 7000 of them! Very well diversified.
Risk 5 out of 7 - fairly average risk.
Potential returns - £10k invested in 2011 would have given you £33k in 2024.
To compare, £10k held in savings from 2011 to May 2024 would have technically lost £6,406 as you would now need £16,406 to have the same purchasing power. Your £10,000 would need to have grown by an average of 4% per year just to keep up with inflation.
It’s pretty obvious from the above that investing can seriously help many of us build wealth provided we invest for long term and don’t sell off funds when the market is going down (Covid period for example).
If more of us understood that investing isn’t day trading or having to pick individual stocks and learnt a few basics about investing, we shouldn’t be scared of such risks and warnings.
The biggest risk is to have the long term savings sitting in an account making no money and losing its value to the high inflation we are currently experiencing.
Perhaps we need to be educated about the key benefits of investing and not just the warnings?
Let me know your thoughts 🙏
My weekly recommendation
My partner Sam found this amazing calculator on NY Times, which allows you to compare the total costs of renting vs buying.
It’s all American, but you can still measure the impact by sliding the scales for different aspects of renting and buying.
So relevant in today’s market 🏘️
Until next time ✌️
Lina at Money Blues
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