74 Money Matters
... This is often how a financial planning journey begins. The underlying “problem” is usually surplus income, savings that are failing to keep pace with inflation, or funds received through inheritance. What follows is a structured but personal process: regulatory requirements must be satisfied, fact-finding undertaken, and—perhaps most importantly—a meaningful exchange between adviser and client. Through this, a clear picture emerges of an individual or family’s ambitions, concerns, and priorities, forming the basis for recommendations that aim to balance opportunity with an appropriate level of risk. This well-established pathway
typically leads to a diversified investment portfolio. Equities, bonds, cash, and alternative assets are combined in varying proportions, often held within tax-efficient structures such as ISAs and pensions. The exact composition depends on the investor’s objectives, time horizon, and tolerance for risk. In principle, this approach is logical, repeatable, and broadly applicable— particularly when saving begins early. However, questions arise as to whether this model remains fully suited to today’s economic and geopolitical climate. Over the past six months, there has been no shortage of disruption: fiscal policy shifts, political developments at home, and most notably, escalating tensions in the Middle East, including US-Israeli strikes on Iran. Unsurprisingly, such events have influenced financial markets and investor sentiment, creating a prevailing sense of caution. It is often assumed that asset values have weakened in response. While there is some truth to this, the full picture is more nuanced. Global markets did show signs of hesitation when conflict escalated in late February, though declines were neither uniform nor sustained. In fact, many indices have demonstrated notable resilience. The FTSE 100, for instance, stands above 10,600 as of
By Rob Cowsill - IFA “I have excess cash and I wish to invest it, what do you suggest?”
early April, close to its historic highs (see graph below). Similar patterns can be observed across major global markets. Over a longer horizon, returns have been particularly striking in certain regions—Japan’s Nikkei 225, for example, has risen dramatically over the past year. In addition to capital growth,
investors with exposure to equities have benefited from dividend income, often received within tax-efficient wrappers. This reality contrasts with the
The decision between
remaining invested and holding cash is influenced by individual circumstances
measurable cost: the loss of potential returns and income that could have been generated during the holding period. The decision between remaining
invested and holding cash is influenced by individual circumstances. Those already invested must weigh their liquidity needs and consider how a market downturn might affect their financial goals. At the same time, they must account for the opportunity cost of holding excessive cash, including reduced income and the risk of mistiming market re-entry. Historically, market declines of over
20% occur relatively infrequently—on average once every six years—and tend to be short-lived, lasting around 14 months. This suggests that markets deliver positive returns the majority of the time. Nonetheless, for new investors or those adding fresh capital, the prospect of entering the market at an unfavourable moment can be a significant concern. Early losses may undermine confidence, delay recovery, and disrupt consistent
more pessimistic narrative sometimes presented by commentators. Markets, while sensitive to events, have not entered the kind of sustained downturn that many anticipated. Yet caution remains warranted.
Concerns persist about inflated asset valuations, particularly in sectors such as large-cap technology, where rapid growth has fuelled speculation of a bubble. For investors, this creates a dilemma. While the instinct may be to “buy,” the principle of purchasing assets at attractive valuations complicates matters when markets appear elevated. Holding cash, therefore, can serve a dual purpose. It offers protection against potential market corrections while preserving the flexibility to invest should prices become more favourable. This strategy—described by John Wyn-Evans of Rathbones as “decisive inactivity” - reflects a conscious choice to wait rather than act prematurely. However, this approach carries a
saving habits. In such cases, a more measured
approach may be appropriate. Monitoring market conditions and responding accordingly—investing gradually or taking advantage of price declines—can help mitigate timing risk. Alternatively, maintaining cash positions may remain attractive if inflation stabilises and interest rates improve. Ultimately, the decision is not
binary but contextual. It depends on an individual’s financial position, objectives, and tolerance for uncertainty. While the core principles of diversification and long-term investing remain sound, their application must adapt to prevailing conditions, balancing prudence with opportunity.
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