For those who invest, what % of your money is in cash versus investments?

[Hertsmum78]

I have been investing some money for approx 3 years now, and I have some with a fund manager and also a small amount in a Trading 212 account.

I am very very risk averse. Our mortgage is paid off and I have a good amount of savings, but of my savings (not including pensions), approx 65% is in cash (savings accounts and premium bonds) versus only 35% in investments/exposed to the market.

Is this insane/very unusual? I think it might be, as I know I could be growing money quicker if I was willing to take more risk, but I find it very hard to see the investments as anything other than money that could theoretically disappear or drop rapidly at any point, with the right combination of world events...

So am just interested to know what % others feel comfortable with. I read something yesterday that said 'cautious' investors keep 20% in cash. So maybe I am the world's most cautious investor...

What’s your end goal and timeframe?

I probably keep 98% of my money in investments, but I’m assuming a 10-20 year horizon and don’t have any real immediate cash needs.

I keep an emergency fund in cash, but that’s all.

I'm about 5 years away from retirement and am gradually moving to the position I want to be in at retirement over the next few years. This will be approx 12% cash, 16% defensive investments, 72% equities, with the cash and defensive investments being enough to cover 7 years' spending.

For most of my life I've been 100% equities except for an emergency fund and where cash has been earmarked for short term expenses such as building projects.

So I'm the other end of the scale from you in terms of risk appetite. Your allocation should be based on your own circumstances (age, what plans you have for the money etc) and your own attitude to risk- there is no point in taking on more risk than you feel ok with if it means that you're likely to sell in response to a downturn, because then you will lose money. But equally, there is risk associated with being too much in cash- your money may not grow and it may lose value if your net returns are less than inflation. This risk isn't as obvious as investment risk because it will look to you as if everything is growing nicely, but it is just as real.

Remember that the chances of your money disappearing are effectively zero if you are well diversified (eg a global tracker or global multi asset fund). Yes you will see drops in value but over time these don't matter and the value will be recovered, as long as you are able to leave the investments where they are and not tinker with them or panic.

Thanks @MidnightPatrol and @GoldenBoldor and these are just the kind of responses I needed and am interested in hearing.

I am 47 and my goals and timeframe are somewhat unclear which is part of the problem I have! But I have a very big and quite stressful job and my main goal is that I want to be able to retire from this job if I decide I want to within the next five years. I wouldn't retire entirely and just sit around watching telly and gardening, but I'd like the financial freedom to walk out if I want to and do something much more part-time and lower paid.

As things stand, I can probably afford to do this, if I keep getting good bonuses in the next few years, and so the fear of 'risking' this money is what keeps me so conservative, even though I have enough in cash to see me through several years of total unemployment.

So I guess I would say that my financial priority is financial freedom and the possibility of much more time to myself within a few years. This is loads more important to me than being able to buy a massive house, fancy car, take multiple long-haul holidays etc. I do have two children likely to go to university within the next decade which is the other thing I need to bear in mind as a potential upcoming expense. And my pension is okay but not big enough on its own to fund a very early retirement without significant savings.

I also balance my natural caution, with the view that it is also my responsibility to grow my assets to the best of my ability, due to most of it being for the benefit of my kids.

Given your age and goals, it’s also worth considering how you are going to access your investments later. I’m probably going to use draw down, so I’m comfortable leaving a higher % in equities even as I move towards retirement.

if you need the money in less than 5 years, cash.
if 5-10 years, low risk funds
if 10+ years, can use higher risk funds.

We are in the early years of retirement and have about 5 -8 years of spending in cash.

Thinking of it that way is more important than % I think.

When I say spending, I don't actually mean a whole year of spends, I mean the gap between income (DB and annuities in payment) and expenditure, i.e. the amount we need to draw from savings each year.

Each year I shift some from non ISA S&S into ISAs.

I think this is one of the rare occasions on MN when you could benefit from seeing a financial planner. It should be possible to do this on a fixed fee basis (£5k or so unless your affairs are v complex). You need a plan that will set you up to cover the gap between retiring and pensions paying out, that's compatible with your low appetite for risk but will avoid you running out of money.

Understanding the difference between risk and volatility might help on the investing side.

Holding 65% in cash savings is not without risk - because over time, although the nominal value will rise, the effects of inflation will erode its purchasing power.
A cash savings of £1,000 saved 10 years ago at usual savings rates compounding would be about £1150 now.

An investment of £1,000 ten years ago in a global tracker would be worth around £3,250, depending on the fund. The longer the time frame, the lower the risk of losing money if the portfolio is well diversified.
Stock market investments go up and down - sometimes by quite a lot. That's due to their volatility. But over time, a well diversified portfolio such as a low cost global index tracker will almost always beat returns on savings.

Actually losing money - receiving less cash than you put in at the start, over a 10 year time frame with a global index fund is rare, but it can happen. If you'd been unlucky enough to invest your £1000 in 1999 during the Dotcom bubble, and withdrew it in 2009 after the global financial crash you would have lost £30 - so, £970 returned.
If you'd left it invested after the crash for another 10 years it would be worth around £2830.

If you'd saved that same £1000 in 1999 and left it for the same 20 years, it would be worth around £1,350.
This is why the time-frame horizon matters so much when thinking about investing.

I have 57k in S&S ISAs

14k in higher risk S&S ISA

5k Barclay's shares

10k Tesla shares

8k Bitcoin

6k Premium Bonds which I am taking out next month as they are rubbish

6k in a fixed rate bond

2k current account

5k and 6k in other savings account with a decent interest rate.

I have no plans for the money.

Your pension is presumably in investments - so I would personally include that money when calculating your percentages of cash to investments.

However, I completely agree with @Chewbecca that you need to look at years, and also at anticipated spends in those years, rather than percentages. E.g. you probably want anticipated uni expenses in cash, that's too short a time frame to be cashing out an investment without risk.

I find copilot quite useful for questions like this. In fact I asked this very question earlier today and got some really helpful ideas and follow on questions. In summary I think it’s more helpful to think about how long your cash/ liquid assets would last at your normal spending rates. It should be around 3-5 years if you are approaching retirement age but maybe a bit less if you are still earning at your peak level.

Thanks all, and yes I asked AI too... which also confirmed my hunch that I am being wildly over-cautious to the point of losing money.

@Hertsmum78im the same age and in a v similar position to you and keep getting told I’m mad to have such a large portion in cash (albeit in cash ISA’s and premium bonds). Do you have a mortgage? I keep being told not to pay that off but I would like to use the cash I have to pay the mortgage off. Is this not a good idea?

If you are in cash earning say 4.5%, inflation is 3.6% and you pay 20% on your returns you are earning 0.1%

Cash you lose money in real time.

investments over most medium time frames investments will outperform cash

@insomniac1 I don't have a mortgage, we paid it off a few years ago.

Ppl who have little in cash and much more in investments - would you recommend paying mortgage off first and then building up the investments?

That was my preference, due to mine being the sole income. For me, the lowering of financial risk by having no mortgage outweighed the loss of investment opportunity in the time frame.

If you remember, there was a bit of a meltdown a few months ago when Trump waded in with tariffs and all sorts of obnoxious behaviour and everyone thought the markets were heading for a crash? In actual fact, they started falling in February and had fully recovered to their previous position by July. If you’re likely to panic in that scenario and think “I’ve lost all my money, I’d better sell out”, then the stock market isn’t for you. But if you can brace yourself and think of the longer term outlook, you’ll be ok.

I’ll be getting my state pension in a few months’ time. I have less than 1% in cash, pension and ISAs approaching £400k all in index trackers (global and S&P500). I have a sizeable mortgage which I’ll pay off using a chunk of the pension money, which is growing faster than the Interest rate I’m being charged by the bank. Keeping your money in cash really isn’t the most productive use of it.

Conventional wisdom is that you'll (over time) get a much better return on your investments than the interest on your mortgage, so assuming a long time horizon you should invest rather than overpay. However, whether that is right for you depends on lots of things- for example, how much time you have before you need to draw on your investments, your attitude to risk and whether you'll just be happier with the mortgage paid off, whether you're liable to panic and sell up.

I am mid 30s - just under 20% cash as premium bonds (my emergency fund) and the rest in S&S ISA equity funds. My pension is 100% equity funds.
I’m happy with risk and it’s paid off over past few years. I agree with previous comments that cash is not risk free, in fact it’s one of the only things guaranteed to lose you money!

I’m not paying off my mortgage as the rate is under 2% and I’m averaging much higher in investments. My mortgage is huge but monthly payment is affordable and I’m not stressed about paying it off.

We did pay off our mortgage, even though we had a great rate, once we used our annual ISA allowance, we overpaid mortgage. Psychologically it's great, even if the numbers aren't right!

We overpaid mortgage as our jobs were a bit unstable but think we missed the opportunity to invest in pensions earlier so possibly not the best choice.

I overpaid my mortgage even though it might not have been the financially optimal choice as I am the sole earner so I was very concerned about job loss etc and that security was valuable to me.

I'm currently at about 20% in stocks (low cost index fund trackers) Vs 80% cash, but my total savings are only just over 2 years of expenditure so I am anticipating shifting the percentage substantially towards stocks over the next 5-10 years and not really increasing my cash holding at all.

I do consider shifting money from cash into stocks now but I am not sure if I will want to move house in the next few years and don't want to be in a position where I don't have the cash to do that.

At the moment approx 1/3rd of our savings and investments outside of pension are in cash. That is a far amount now as it includes DH’s lump sum (25% old LTA).
DH has retired (55) and approx 1/4 of his SIPP is in cash. My pension is DB (not retired yet).

We have under 3% in cash but it's a significant sum - enough to cover living expenses for a couple of years, more if we cut discretionary spending. I have a high risk attitude towards investing and am mid 40s, so I want to keep as much invested as we can as I see a lot of growth opportunities.

We haven't paid off our mortgage. The investment returns have been higher than the mortgage interest.