Should I just save my money in a bank savings account or invest it in stocks, mutual funds, etc.?

Should I just save my money in a bank savings account or invest it in stocks, mutual funds, etc.?

It is naturally for people to assume that “doing something” is riskier than “doing nothing”.

This isn’t always the case. Sometimes “doing nothing” can be riskier in investing, business, politics and life.

I was reading a book this morning about political leadership. The author made the point that the former UK Prime Minister Gordon Brown never recovered from one event.

He was considering calling a snap election in 2009. His polls were high.

Not everybody liked him but the public considered him very decisive given his response to the Global Financial Crisis of 2008–2009.

The fact that his polls were up gave him added confidence. Word leaked about a plan for a snap election.

The opposition leader told him to “bring on” the election. He decided against it even though they weren’t prepared and are said to have admitted that in private.

He was seen to have bottled the election and he never recovered.

People made fun of him for his lack of decisiveness with pranks like this……

The same is true in business. Kodak thought the status quo would last forever.

They were at the top of their game. I met somebody who knew some of their executives in Tokyo who were spending $10,000 a month on rent in the 1980s!

They were confident about the future to say the least and didn’t see the need to innovate and take a “risk”

They decided not to invest in digital photography. They paid the price and went bust:

The same is true in business. I have met more people that have lost from “doing nothing” to “doing something”.

The reason is simple. Doing nothing is a silent killer. If you are getting 0% in the bank and inflation is at 2%, you have only lost 2% to inflation.

You won’t notice if your favourite coffee has gone from $5 to $5.10. Or you will, but you won’t care.

But if you use 2%-3% to inflation for 10 years+, then you are looking at a 35% loss, because inflation compounds.

Currency devaluations are even more brutal. The average South Africa, British, Nigerian and Ghanian investor has lost a lot from this in the last 12 years.

And I could have gone on with that list to include many Latin American countries.

Don’t get me wrong, we should all have some cash for emergencies.

It isn’t an investment though and it will never beat the markets long-term, unless we go through an special period that has never happened before.

Markets are just more volatile than cash. That doesn’t make it riskier if you hold on long-term.

The only reason you shouldn’t invest is if you suspect you would panic sell whenever there is a market crash.

Contact me today - Personal Investment Services - Adam Fayed

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