Ask us anything: Is it better to keep money in cash or invest right now?

0:01You know what I love, Damo? Things that save me time. You don't have YouTube Premium, mate, so I just don't believe that. Granted, I'll give you that one. However, I've got one for you. A great time saver in personal finance is Money Week magazine. They spend a lot of time distilling the biggest stories in personal finance down into consumable chunks, so you don't have to scroll and scroll. They give practical tips on savings, investments, pensions, the UK economy, the global economy. It's like your five a day, but for finance. If you want to give Money Week a try, you can get six issues in print and the app absolutely free by visiting moneyweek.com forward slash money.

0:34After your trial, you'll save an extra five pound a quarter on the subscription, which is exclusive to Making Money listeners. And that's moneyweek.com forward slash money. But there's a link in the description if you just want to click that.

0:49Welcome to our mini episodes where we take a deep dive into your biggest financial questions. Deep dive? Belly flop more like. But generally, Thanks a lot for your questions that you've been sending in. We can't answer them all, but we love reading each and every one. Some of you have also been in touch to ask when we're going to be back for season two. Well, drum roll please, T. Newsflash, we're going to launch next month in October. We've got some great guests lined up, including Deborah Meaden, on how to be better with money and how to teach kids about it. We also have Romy and Nikisa from Pens and Craft for a deep dive on investing.

1:24And we're planning to cover other topics like mortgages and how to get a pay rise. But in the meantime, we're working our way through the mountain of questions that you guys have sent in. So what do we have today then, mate? So the first question for today is from David. He asks, my lifestyle pension puts 30 % of my pension into UK guilts and they have tanked with inflation. Should I move back to equities? Will UK guilts ever recover? Dun, dun, dun. Listen to Demo to find out if UK guilts will ever recover. So there's a question of allocation here. And obviously there's been an allocation decision, which is 70 % equity or 70 % stocks and 30 % bonds or guilt.

2:00Do you want to tell the people what a guilt is? I mean, do you want to tell me what a guilt is? Yeah, yeah, yeah. So it's just a bond. A guilt is the UK's name for a bond. Oh, cheers, man. Appreciate you. I think it's called a guilt edge security, as in like, it's like, you know, it's that primo thing or like it's guaranteed. Sounds like a sword, guilt edge security. If something's guilt edged, isn't it like, it's got like a golden edge or something. Sounds about right. It means like, yeah, it's rock solid. And then it's funny that it's called that and it's collapsed in the last year. But anyway, so the allocation question of should I be in all stocks?

2:33Should I be in bonds? I'm personally 100 % stocks and that's reflective of my age. I want the most exposure to the riskier portion, the ability to grow my portfolio as possible. The next part of the question is when a portfolio doesn't perform as you expect it to, because the whole purpose of having an allocation to bonds and an allocation to stocks is they're meant to kind of move in opposite ways, or at least that the bond portion of the portfolio is meant to kind of dampen the risk or the volatility, I should say. So when the stocks crash, the bonds should kind of limit that. Now, what happened in 2022 was that didn't happen and both crashed.

3:12So stocks were down 18%. And I I think bonds were down by about 13%, which is quite rare. I found a few examples where this happened in the past. 1931, 1946, 69, 73 and 77. 69. All right. Sorry. Sorry. Yeah. What's so important about that number, T? It's my lucky number. Oh, is it? I got on my basketball jersey as well. Have you? From when I was younger, from my school days. You live that 69 brand. What's wrong with the 96? That means that they don't like each other. They're facing the wrong direction. Oh, they are, yeah. I don't know what you do at home, Damien, but a 96 is not that wrong. I've been doing it wrong my whole life.

4:03You've been doing it wrong your whole life, mate. Yeah, the missus is like, let's do a 96. And she turns over and falls asleep. And I'm like, yeah, this is the good stuff.

4:14Sorry, continue, continue. Yeah, so bonds. It was a bad year. Now, the thing about an investment strategy is you don't just change everything because you had a bad year. You stay consistent. It's not unprecedented that bonds or gilts have fallen in value at the same time as stocks. We had some very unique circumstances like the mini budget and stuff, which really hammered that in that year. But it is just one year. I don't expect my portfolio to always go up. And when it has a massive drop, I don't then reconsider my allocation. Now, I just want to caveat that with I'm 100 % equities. I'm not in bonds.

4:52So if you're asking me if I would be in bonds, I'm not. So I can't speak to that. But if you made a decision, David, around your allocation or your pension provider has for you and you're questioning if that's right or not, that's kind of a separate conversation to should I be changing things because they've both fallen in value? Well, you know what I always say, one of my many favourite sayings, when in doubt, zoom out. So I always look at this as a long-term thing, and I think in the long term, the stock market is going to outperform the bonds. But we don't give financial advice over here. It's another thing my missus says to me in the bedroom as well, that.

5:26So it's funny. If in doubt, zoom out. I think we should move on to the next question. Yeah, definitely.

5:37Okay, and the next question, I like this one. is from Andy. He wrote, I've been noticing my portfolio in Trading 212 has been dropping steadily for over a week. Now, this makes me want to take some money out of the savings and chuck it in Trading 212 while the market is down and nabbing me some cheap shares. You know what I say? Buy the dip. No one knows what you're saying. Buy the dip and then we go to Chip. Chip is short for Chip Riani, which is a very cool restaurant in London. But basically, you buy the dip and then when it goes back up, you've made loads of money. So I always say buy the dip.

6:08You've not even finished the question here. You've not even finished the question. That is the question. No, it's not. There's another section. I'm looking at it. I thought that was your answer. My bad. Okay. The guy's just booked a table for two at Cipriani's and he's wondering what is going on. Sorry. Oopsie. Sorry, Andy. I'll start again, Andy, and do the justice of giving you your full question. Open nosing my portfolio in Trading 212 has been dropping steadily for over a week. Now, this makes me want to take some money out of the savings and chuck it in Trading212 while the market is down, nabbing me some cheap shares.

6:47But should I take that risk and take it out of a currently decent 5 % APR instant access account? Like, the money is better in savings right now, but it would mean missing out on some cheap stocks and shares. In the long run, it's probably better in the stocks. So I may have just answered my own question. What do you guys think? He's a sharp guy. He answered his own question already. He's making the right moves. You answered his question without even finishing it, mate. So you're clearly very sharp. I know. I just left out all the due diligence part and just went straight in for buy the stock.

7:19Yeah, just like, yeah, buy it. Buy more, buy more. Worry about it later. Yeah. So I actually made a video a few weeks ago where I looked at this, where it's cash versus investing, because I know it can be very tempting at the minute where if you see a 5 % return in a bank account that seems guaranteed versus an unguaranteed return of say, 7%, 9 % or whatever in the stock market. Now, the way I think about this is it all comes down to when you'll need the money, not the return on offer. So the stock market long-term has always outpaced cash over periods of say, 20 to 25 years. If you look at the last 123 years worth of data, there's never been a 25-year period where the stock market hasn't returned better than cash.

8:02In fact, by holding cash instead of going into the stock market, there's a massive opportunity cost. I think the difference over a 20-year period is 1 ,281 % on average. So 12 times your cash by sitting in cash, you get 12 times more money by going into the stock market. So just because the rates are looking better short term on cash, that's a great thing for the money that you need to hold in cash. But for me personally, any money that I don't need for 10 years plus is in the stock market or going into the stock market. Just because the stock market's declined recently doesn't then make me think, oh, the money I have allocated here for short-term requirements in cash, I'm going to pile into the stock market.

8:49The reason it's in cash is because I need it in the next five years. I like that next five years. Any cash I don't need for the next six months is going into the markets. So I think five years is probably a bit more cautious. I like that though. I mean, it's whatever your timeline is, but what I'm trying to get across is think about it in terms of the time that you need the money, not the return on offer. I think people suddenly think because the interest rate's gone up by 5 % on cash, that there's a decision to be made of, should I stop investing and put it into cash instead? Whereas the long-term trends are that the stock market has always over-delivered versus cash over long time periods.

9:29And if you're talking about investing, then the money's always been tucked away for 10 years or whatever. So over those time periods, the chances of stocks outperforming cash based on historical measures, anything can happen, obviously, are quite significant. so just because the market's dropped in the last week doesn't mean I'm then thinking oh I'll take my emergency fund and slap it in the market I will add a disclaimer there when COVID hit and the markets dropped by 20 % in a few days I chucked everything I had in it and that was a risky decision but I made I made you know I made some good money on that and and yeah I cancelled buying a house, put the house deposit in.

10:11I put my emergency fund in. I did it all. That was a very, very tea kind of move for you, David. Actually, that's probably one of the few times I've seen you just go balls deep and just be like, yeah, we're throwing the kitchen sink, the house, everything at it. That was a good time, though. Well, not good because it was COVID and it was lockdown, but it was a good time for investors. It was a part of me that thought, you know, I missed out on the 2008 crash and I saw what had happened there. And I saw the market's reaction to the news of the pandemic and I just thought, yeah, get it in there.

10:41so I did and it paid off. So I don't practice what I preach at all times, but a slight downward trend on 212 isn't really going to make me throw my emergency fund in there. I'm talking about a once in a generational pandemic was the only thing that got me to throw that in. Do you know what I mean? So slightly different. And if people want to learn a bit more about this, Damien, what's your video called that you made on it? It's called Cash Versus Investing, Don't Make the Wrong Choice. On Damien Talks Money YouTube channel? Yeah, we'll link it. We'll put it in the show notes or whatever. That's free advertising, Damien.

11:13Yeah, plug it. I'll take my royalties for that. Free advertising name. Take my check. All right, next question. So Mari asked the question, what are your thoughts on AI investment tools?

11:28We have none, quite clearly. Damien, I saw in the notes, you did have some thoughts. You wrote, a load of bollocks. you had to elaborate on what a load of bollocks means regarding AI. Yeah. So that was my, like, that just to, just to, um, provide context to listeners, we get the questions. We might put a couple of notes about what we want to speak about. And my, my note was a load of, a load of bollocks. So these, these, these AI tools are essentially, I don't know, because I don't look at it too much, but what I imagine they are, uh, they're being packaged as we use AI to find a way to beat the market and trade for you.

12:08And you can buy this thing that will automatically or automagically invest on your behalf and make you loads of money. The reason I think that's bollocks is if someone had a magic money machine, they wouldn't be selling it. You know, I just think it's trying to capitalise on hype through slapping AI on the front of it. I couldn't agree more like if you had yeah why would you share it with anyone if you had it's just like the people who say um I make they slide into your LinkedIn inbox and like I make 50 grand every two hours trading for my living room and I can uh if you sign up to my course which costs you a grand a month I can teach you how to make 50 grand an hour just like me and it's like if you're making 50 grand an hour what are you doing DMing me on LinkedIn it doesn't make any sense it's not making the math is not mathing yeah the the thing is like there was a quote I think from Bill Gates that was like, we underestimate how much of an influence technology will have in one year, but we overestimate what its impact will be in one year, underestimate what its impact will be in 10.

13:08And I think that that's so true of these hype techs when they come out. You know, we see the emergence of something that's quite impressive, like chat GPT. And then everyone thinks, oh God, slap it on everything. And then you've got like AI ready meals. And it's just, it's just a bit stupid do you know what I mean it's a bit there was a chat GPT 1, 2, 3 and 4 I think and so like each one that gets released is better so with the same with the AI investors I think it will get better over time but like you said I think it's going to be for like the top they're never going to sell it to you the high net worth individuals they're never going to sell it to you you can get it with certain hedge funds but like you're going to need to be putting in a lot of money and yeah it's not going to be for every Tom, Dick and Harry yeah they'll never sell it to you because something that can invest well by itself is worth potentially trillions of dollars.

13:59It's priceless. Yeah. So it's never getting sold. Yeah. That's a load of bollocks is my synopsis of that. But then again, you never know with these hackers, one of these like unknown or whatever they're called, the guys that wear the masks, the hacker guys, some like computer genius can make us a really good one. Unknown. This is a budget version. The unknown. We are unknown.

14:24what are they called anonymous anonymous that's the one not unknown anonymous you've always got your finger on the pulse yeah ear to the streets always guys called the uh the slightly obscure ones but yeah so um what what what was we saying ai yeah do you believe in i oh no but that's not the question i think that that that's obviously transformative technology and i think it would do well and like in the same way that I think yeah I think blockchain will will do stuff in the long term but I don't think there's opportunities for people on the street to pick it up and make a load of money out of it right now and I don't think there ever will be in that sense I think people are just trying to capitalize on the hype and they're just being predatory and taking the advantage of people.

15:17So speaking of AI I'm going to ask ChatGPT now to give us an outro for this podcast give us an outro one second i'm typing this outro for a money podcast hosted by two idiots

15:38what's it got for us oh he's giving us a script whoa hold on just read it no no no i can't read the whole thing, make it shorter. Yeah, see, we love a bit of AI. Are you ready? Can I share my screen with you? Okay, I'm host one. Okay, go. So this is what ChatGPT gave us as an outro. And that's a wrap for our money misadventures, dear listeners. Remember, money might be serious, but we certainly are not. Whether you're a financial guru or just puzzled as we are, keep smiling through the dollars and cents. stay foolishly fun and may your wallets never be empty catch you next time on the two idiots in a wallet podcast

16:26I mean these AI these AI bots might be onto something mate give it your money and start investing with one is what I say after that that's better than we could have done don't tell the bosses mate we'll be sacked in the morning if they do too well you'll be sacked in the morning oh dear

16:48This isn't advice. Whilst we discuss individual examples, we can't give you personal financial advice. What we can do is offer a perspective and discuss the issues. Investments can fall and rise. In fact, that's almost a guarantee. Remember, past performance is no guarantee of future results. So your money is at risk with investing. Also, remember other fees may apply.