Talk about money at dinner
Goldman Sachs recently launched a new online retail bank in the UK. To promote the bank, it offered clients 1.5% interest on their savings accounts. UK inflation is currently around 2.5% so investors were guaranteeing themselves a negative real return.
The only way to avoid such pitfalls is for investors to educate themselves.
In SA talking about money makes many people uncomfortable.
However, if people were more open to talking about money, they’d inevitably develop more of an interest in it, how it works and how to make the best use of it.
There’s evidence that people who consider themselves more informed as investors also feel more comfortable with their financial status.
Schroders’ Claire Walsh considers this one of the most “illuminating” findings of the recent Schroders Global Investor Survey.
“We asked investors to categorise their investment knowledge,” Walsh says. “While those who consider themselves beginners are only saving 11% of their earnings, those who said they have advanced knowledge are saving 15%.”
The survey made similar findings about those already in retirement. Among investors who consider themselves experienced, 60% said their income was sufficient and they were comfortable. Only 32% of those who categorised themselves as inexperienced felt the same way.
It’s probably evident that those who have educated themselves are making better decisions about their money. Yet they remain in the minority.
Perhaps, the real issue is simply encouraging people to talk about money in the first place.
Patrick Cairns was a guest at the Schroders International Media Conference in London.
Moneyweb
For the year to end October, the FTSE/JSE Shareholder Weighted All Share Index (SWIX) was down 13.6%. Over the last 12 months it was 11.1% lower, including dividends. Investors would’ve been substantially better off in SA government bonds and cash.
Even over three years, the SWIX produced a 1% annual return. Thus, after inflation, performance was negative.
Given the economy’s weakness,