We are often approached by people who have capital to invest.
We think the best starting point is to consider keeping all that capital as cash (in an account earning interest) unless there is a really compelling case to invest it.
Take for example an enquiry from this afternoon.
A client of ours is helping a lady who very sadly recently became a widow. Her husband’s assets have now been transferred to her.
She is 70 years old and has her own pension and now a survivor’s pension from her husband’s pension plan.
The total income that she receives from these pension plans and her State Pension is sufficient for her needs. She owns her home and this is not subject to a mortgage.
She has, in addition to her home, assets valued at close to £900,000 most of which is in a variety of deposit accounts and some National Savings & Investments certificates.
Tellingly she has no children and no one financially dependant upon her.
Why should she invest at all?
There might be an argument that inflation will erode her capital value but actually does that really matter? Even if she needed an extra £10,000 per year to fund her lifestyle her assets excluding her home would last another 90 years!
She might need care at some stage in her life but she is absolutely not going to get any state contribution to help her but she will always be in a position where she can choose the type of care home she wants even if she does have ultimately to use some of her assets to pay for that.
Probably she is better off keeping her money in cash taking on the risk of inflation eroding the money and at least being able to sleep at night.
And of course her friend has wisely advised her to spread her cash amongst a number of banking institutions to make sure it is safe but why should she invest when she doesn’t have to?
