Savers urged to consider alternatives to cash

As the four year anniversary of interest rates hitting their all-time low of 0.5% approaches next week and with inflation still hovering at 2.7%, Fidelity Worldwide Investment is urging those saving for the long term to consider whether their savings could be working harder.
 
While volatility in the stock market in recent years has caused many savers to flee to the perceived safe haven of cash, Fidelity's analysis shows that many would have been better off if they had remained invested in bond and equity markets.
 
Tom Stevenson, Investment Director, Fidelity Worldwide Investment, comments: "During times of market uncertainty investors look to perceived ‘safe havens' such as cash.  Everyone's attitude to risk differs, but those with a medium- to long-term investment time horizon should be considering stocks and shares in order to benefit from the superior returns offered by equity and fixed income markets and to protect their savings against the impact of inflation.  While cash may feel like the safest option, with interest rates likely to remain low and inflation stubbornly high, it will offer very little opportunity for savers to grow their hard earned money or to maintain its purchasing power.

"Accepting the inevitable ups and downs of equity and bond markets, investors can benefit from the long term outperformance of shares and bonds while still reducing the risks of investing with a few simple measures.
 
"For example, saving small amounts on a regular basis can help to combat the natural tendency of investors to sell when markets are low and buy when they are high.  Diversification is also important; bonds and equities can move in different directions and owning a balanced portfolio can smooth returns.”
 
For savers who are looking for alternatives to cash and are seeking to take their first steps into the bond and equity markets, Fidelity has recently launched a guidance service to help savers with their investment choices. Fidelity has also launched a half price ISA offer and improves that to an AMC free ISA if a new Fidelity SIPP is opened before 31 January 2014.