Rethink the cost of cash

Inflation eats away at the real value of cash

The impact of a 3% inflation rate on the purchasing power of a £100,000 cash pile over time is illustrated here (for simplicity, assuming no interest returns):

Source: BlackRock. The above graph is provided for illustrative purposes only. If you place your money on deposit with a bank or building society, interest rates may fluctuate but your original capital investment will remain constant. Past performance is not a guide to future performance.

"So what do I do with my money?"

Cash is an essential part of everyone’s finances and plays an important role in saving and investing, inflation and taxes can erode the purchasing power– what you can buy with your money – on all investments, but historically returns on cash have struggled to keep up with inflation over the long run. That’s why you may need to reevaluate your attitude to risk and rethink your portfolio. We believe that even small steps to change your portfolio today can make an important difference in the future.

Investors should be aware that moving out of cash in search of higher returns to meet their long -term goals will involve accepting a higher risk of capital loss.

Rethink the cost of cash with Ewen Cameron Watt

The opinions expressed are those of BlackRock as of October 2012 and are subject to change at any time due to changes in market or economic conditions. 

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