Cash rates are dire and markets are volatile.
You could have said that sentence to anyone at any point in the past few years and the chances are they would agree.
However, there are still the same alarm bells ringing at the start of 2016 as investors take on the difficult task of searching for income and growth.
Cash rates have gradually decreased since the crash in 2008, which forced the Bank of England to reduce the base rate to 0.5 per cent by March 2009.
Recent research from Moneyfacts shows that the average five-year fixed-rate bond has dropped from 4.01 per cent to 2.59 per cent over the past five years. Easy access deals have also suffered, seeing a fall from 0.84 per cent to 0.63 per cent over the same period, with 75 per of the market paying 1 per cent or less.
But investors still looking at cash to provide income should not find this much of a surprise, as banks have continued to squeeze interest rates in light of the sustained low base rate. Although a hike has been mooted later this year, it has supposedly been on the cusp for a number of years. In any case, any rises are likely to small and subsequently have little impact on deposit rates.
Income may be difficult to obtain this year - but even more so for those only exploring one asset class.
For investors looking for growth, perhaps the one consideration that is yet to receive the limelight is pound cost averaging. With continued uncertainty and sharp market fluctuations anticipated, regular investment may cushion some of the risk. Clearly if markets recover quickly then the lump sum option will rule the roost, but industry experts are cautious on growth expectations over the next 11 months at least.
The key for consumers facing these options is to seek expert advice. It is often the case that those who have historically invested in cash are not averse to riskier investments, but fail to understand them.
Cash is the go-to asset for many - being capital secure, easy to understand and transact. But in the simplicity lies the danger. Large sums of money can be left to stew in low interest deposit accounts, with reducing income, capital erosion and little or no tax efficiency.
Those with well-diversified portfolios are best positioned to cope with any turbulence throughout the year. Cash is an essential component of this, but really only to cater for short-term liquidity needs. Having a spread of assets and investment vehicles will not only allow investors to take advantage of growth and income opportunities, but also tax allowances.
Instead of disincentivising savings and investment, low interest rates should encourage people to seek other ways of meeting their objectives.
Rachel Springall, finance expert at Moneyfacts says, ‘savers can do little but sit back and wait for a miracle to happen in the savings market.’
Maybe that miracle is persuading the masses to pay a fee to sit down with a good quality adviser.
