Where is best to keep savings and wealth right now?

I’m constantly thinking about various investment strategies to figure out how we can grow our wealth. The goal is to shorten the time it takes to achieve financial freedom and be able to spend our time on things that are most important to us.  

Lately, I have been trying to make sense of what we are seeing in the real economy and what we are seeing in the markets. I think it is stating the obvious to say that everyone would agree there is a complete disconnect. We are facing a global pandemic where all business activity has been significantly disrupted, there is no blueprint on how to navigate our way through, and we are facing the prospect of a significantly higher unemployment in the foreseeable future. 

Yet, we see that globally stock markets have bounced back strongly. Commodity prices like Gold have shot up and property transactions seem to be through the roof with deals being done close to the asking price. So, the big questions are; 1. Why? and 2. How long will these trends last? 

I don't want to make any predictions on how the global economy will do going forward. Or when will we get a vaccine? Or how quickly will things become ‘normal’ again? Whether we will get a V or a U-shaped recovery? Frankly, it is impossible to predict and so it is best to work with what we know in the present.  

What we do know is that globally every single major country is spending vast amounts of money to support the economy. They are doing it through direct Govt. spending and handing out cash to individuals and companies by running the money printing press 24/7. I believe that there is so much liquidity in the system that it is inflating the prices of all asset classes. So, we are seeing such price appreciation in equities, gold, property etc.  

How long will these trends last? My view is much longer than we can imagine. Countries across the world have run a deficit/debt at a national level for decades. Money printing during the previous financial crisis of 2008/09 was unwound very slowly over the last decade, and interest rates stayed very low. This was despite such a long bull market and record low unemployment. So, why will the Governments not just continue on the same path, only now at a much larger scale? What’s more, we can go into a world of negative interest rates to further encourage and incentivise people and companies to spend.  

So, to summarise, I feel the real value of the wealth held in cash is going to erode at a much faster rate over time. Coupled with potentially much higher taxes in the near future means that the value of £100 held or earned today is going to be worth a lot less in 10 years.  

I believe with a 5+ year time horizon, we need to potentially keep our savings and wealth in real assets, and not in cash to make it work harder than ever before.

Choice of assets and extent of diversification depends on multiple factors such as personal circumstances, beliefs, risk appetite, and goals. One size does not fit all. Let me know if you have any comments, thoughts or questions on the above and I will do my best to assist. 

Kanishk Swarup - Helping you to grow your wealth and achieve financial freedom