If you spend any time on X.com (formerly twitter) reading comments about investing or opening a stocks & shares ISA, you will undoubtedly see posts such as the following:
- “Don’t use a stocks & shares ISA, you will lose in the end”
- “My old man told me stock market is like gambling; I’m definitely not risking my money on it”
- “Why stocks & shares, you can lose more than you put in”
So are these naysayers correct in advising people to stick to cash savings or is it more complicated?
At one level they are right:
When you invest in shares, the market value of those shares and therefore the value of your investment can go up and down for a range of reasons and you could end up with less than you invested. If you are completely uncomfortable with that risk, ie: the chance that you end up with losses on your investment, then investing is probably not for you.
It should be said however that keeping your savings in cash is not completely risk free. Savers are exposed to the risk of inflation: if the inflation rate is higher than the interest rate on your savings, then over time the value of your savings could be eroded in that your money will be able to buy less than it could at the start. There is also a small chance that the savings provider fails although you can eliminate this risk by ensuring that they are covered by the FSCS deposit protection scheme which covers deposits of up to £85,000 in UK authorised banks, building societies or credit unions.
But could you lose it all if you invest?
Well it rather depends what you invest in. If you buy shares in just one company, then if that company goes bankrupt the shares could end up worthless. However if you invest in a diversified portfolio of shares in different companies or in a fund that invests in a wide range of companies, such as an index tracker that tracks performance of the overall stock market, the risk is much lower. Some companies might go into administration, but it is hard to imagine a scenario where all companies go bust or where the value of the overall stock market goes to zero.
So why invest then if there is a risk that you might lose money?
The main reason is that returns on shares have historically outperformed cash, particularly over longer time periods such as multiple years. Although past performance should not be used as a predictor of future performance, over the last 10 years the MSCI global index, for example, grew at an average rate of 11.1%*. Over the same period, the UK base rate was below 1%, only reaching 5.25% between October 23 and July 24.
If you had kept your money in cash savings during these 10 years, then you would have missed out and the impact is even more marked over longer time frames. Fidelity International data shows that if you had put £1,000 into US treasury bills (a proxy for cash) on 31st December 1999, by 30th April 2025 it would have been worth £1,714. If you have put the same £1,000 into global shares (using the MSCI world index as a proxy), it would have been worth £4,926 or nearly three times as much. At times (for example during the 2008/9 crash), cash would have been worth more but for just under 80% of the time period, shares were the better performer.
This potential for extra growth is why some chose to invest when they are saving for the longer term. It is one of the reasons why pensions are often invested in a diversified portfolio of investments rather than just left in a cash savings account.
So the X.com posters may be partly right but they are not necessarily telling the whole story.
*Source: MSCI world index fact sheet, growth over 10 years until 31/1/25. Growth is calculated in dollars, calculated in pounds it was 13.2%.