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Stepping out
of cash

Although Latin Americans have reduced their allocation to cash by 10% since 2018, they have 58% of their portfolios in cash, the second highest allocation to cash after European counterparts.

Reasons for holding cash

While cash is primarily held for immediate needs, one-third is held for future growth opportunities

Nearly two thirds (58%) of Latin Americans’ portfolios are allocated to cash, which falls to 37% and 36% among the advised and Mass Affluent. Why is the majority of their portfolios held in cash? Latin Americans feel that the majority of the cash they hold is needed for immediate or upcoming expenses or emergencies, but one-third is held for long-term savings or an investment opportunity – which means there is a chance of putting this money to work soon.

Majority of Latin Americans consider putting their cash to work

Given the amount of cash held for future savings and investment opportunities, we asked Latin Americans whether they considered moving any of their money from cash and savings accounts into investments. Around a quarter (25%) are actively considering further steps out of cash, and over a third (42%) are passively considering it, making Latin Americans the second largest group of considerers after their Asian counterparts.

Consideration to move cash and savings into investments. Consideration to move cash and savings into investments.
Consideration to move cash and savings into investments.
Consideration to move cash and savings into investments.

Increased access to financial education would encourage investing

67% of Latin Americans have considered investing some of their cash during the last year. The most common factors that would help them go ahead and invest involve accepting and understanding risk. Reassurance that capital is safeguarded and education leading to a clear understanding of risk would motivate Latin Americans to invest more than the past performance of an investment would.

Factors likely to increase confidence to step further out of cash.
Reasons considering stepping further out of cash.

Better understanding of investing benefits driving increased consideration

Among those who are seriously considering investing more of their cash, the most common reasons for doing so is an increased interest in investing, followed by a recommendation from their advisor and realizing that interest rates on savings accounts are likely to remain low. 46% of these Latin Americans own one or more investment products, including life insurance plans/products.

Risk aversion and lack of comfort with investing drive investment hesitation

33% of Latin Americans are not considering moving more of their cash towards investments. With nearly all their portfolio in cash (78%), these Latin Americans are concerned about the risk of losing their investment, think their investment would be too small to make it worth it, and need the liquidity. Financial education and advice could help investors find a balance between the safety net of cash and diversifying their portfolios to meet their goals.

Barriers to moving out of cash.

Take action

As cash and cash products no longer yield the returns they used to, Latin Americans should be critical of their portfolios and risk tolerance in order to meet their financial priorities. Exchange traded funds provide an attractive solution for diversifying their portfolios in a liquid, cost-effective structure.

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