What Is Investophobia And Are You Suffering From It?

What Is Investophobia And Are You Suffering From It?
Underwater by Andy Deitsch. Why?

A study of thousands of Brits conducted by Scottish Friendly suggests half of us are afflicted with what it calls a chronic case of ‘investophobia’.  Discover what it is below, along with a helpful infographic on saving, investing, compound interest and more.

Despite Savings Accounts Paying Pitiful Returns, Savers Are Still Worried About Investing In The Stockmarket

Scottish Friendly's Definition Of ‘Investophobia’

The fear or aversion created by the phobia of investing your hard earned cash, despite inflation and rock bottom rates on secure cash accounts reducing the value of savings in real terms.

Its study discovered the following:

Around two thirds of the savers in the research are aware that interest rates on savings accounts are less than the current rate of inflation, but the fact that they are losing money in real terms seems to do little to change their minds.

Just over half of the respondents said they wouldn’t consider investing in stocks and shares, even though inflation reduced the value of the money they have in secure cash savings.

Confusingly, the most common reason cited by almost half of the respondents that wouldn’t invest was fear of losing money.

'Investophobia' Explained

Here’s a short video on 'investophobia'.


Calum Bennie, Scottish Friendly’s savings specialist, says:

By holding savings exclusively in cash at the moment many British savers’ are effectively letting their money diminish.  Every pound that they save becomes less valuable while held in an account that delivers returns below the rate of inflation.  Worryingly, our findings suggest the savings and investment decisions of so many Brits are being driven by a nagging fear of losing money and this ‘investophobia’ may be clouding personal judgement when it comes to important financial decisions.
Investing is not without risk of course and the value of investments can go down as well as up.  However, interest rates on secure cash accounts have been rock bottom for a very long time now and inflation is consistently eating away at the value of that money.  Attitude to risk is a personal thing and ultimately you shouldn’t feel uncomfortable about where you’ve put your money.  If you’re waking up with a cold sweat in the middle of the night it’s clearly not the right option for you.  However, it seems that many savers are not willing to even consider stepping out of their comfort zone to look at possible investment options, which suggests fear is winning out over options that could make financial sense.
Investing doesn’t have to be scary, or complicated, or only for the wealthy; it’s for everyone.  It is a tool that is readily available to all that could help empower financial well-being and could be well worth considering at the very least.  Don’t let fear stop you from considering ways that could make your money work harder.

A Quick Look On Cash Versus Equities

Whilst cash is currently losing out to inflation, if you roll back to 1970, interestingly, cash has actually seen a real return of about 1.5 per cent per year over the period.

Even at this modest rate, if you had £100,000 in 1970, the magic of compound interest would have seen it grow into £204,000 in today’s 2018 money.

Over longer periods, more money is usually made by investing in stockmarket assets.

A 50:50 split between cash and equities from 1970 would have seen your real return improve to around 5.0 per cent per year. 

And that would now make you a millionaire!


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