Cash vs bonds & equities
Which is safest over the long term?
Investors are holding a large percentage of their portfolios in cash because of higher interest rates and fears about market volatility
“Cash doesn’t rally.
Grace Peters
Global head of investment strategy,
JPMorgan
equities
61% of investors see cash as the least risky asset class over a 10-year period
More than half of investors have 10–20% in bonds
53% of investors believe interest rates safeguard cash from inflation and falling markets
24% of investors
hold no bonds at all
6 out of 10 investors have 10-20% of their portfolios in cash and for 1 in 10 it is as high as 21-30%
55% of investors
are uncertain about where to invest
Source: Capital Group
“The discussion among central banks is not how much they're going to hike — it's how much they're going to cut. That makes cash quite risky, because you might find in one year’s time your interest rate on cash will be much lower.
Flavio Carpenzano
Fixed income investment director, Capital Group
These cash - heavy investors are missing out on potential returns on bonds and equities because cash has nearly always underperformed bonds and equities over the long term (a 5 plus year period).
Bonds &equities
Gains are limited by
interest rates
In the last three decades to 2023 the S&P 500 has returned more than 1,700%
Cash rates look set to fall from 5% in second half of 2024
Shares rise 8% annually
US bonds and equities outpace cash by 20% in 5 years and 60% in 10 years*
Following the last of seven recent Fed rate hikes, fixed income beat cash by an average of 14% over two years
Soure at 31/12/23:
*J.P. Morgan's Long-Term Capital Market Assumptions based on inputs from a 60/40 portfolio (US large Cap and U.S. Aggregate Bond) compared to USD cash.
“From a longer-term perspective, it's very difficult to lose money on a well-diversified portfolio. The probabilities of having positive returns that beat cash become better and better the longer the investment horizon.
Willem Sels
Global chief investment officer,
HSBC Global Private Banking and Wealth
The Capital Group study was commissioned to gather the views of 450 global high-net-worth investors via a survey conducted by Financial Times Longitude between 4 December 2023 and 23 January 2024. The study samples HNW individuals with minimum personal wealth of $1m (not including primary residence). Quota: minimum 10% with $5m+ personal wealth. Investors were based around the world: France, Germany, Hong Kong, Italy, Luxembourg Singapore, Spain, Switzerland, UK, US.
Find out more about how cash hurts your investment returns and what you can do instead