Cash appears to be anything but trash to the majority of the investing world. The financial crisis brought historic volatility and fear that sent many people running for the hills. In order to minimize pain, investors shifted their assets toward cold hard cash. Nearly six years have passed since the credit meltdown started to fill headlines, but investors around the globe are still hiding from risk assets.
To little surprise, the painfully slow economic recovery amid record amounts of central bank intervention hasn’t exactly instilled confidence. Cash allocations among retail investors with investable assets ranging from less than $250,000 to more than $1 million increased over the past two years, from 31 percent in 2012 to 40 percent in 2014, according to a recent report from State Street.
“Investors aren’t able to stomach the volatility they perceive to be in play. Even when the market rises triple digits, as it did multiple times in 2013, investors seek comfort in cash,” explains the report. “The crisis of 2008 is burned into their memories. The younger generations in particular are wary of investing in what they perceive to be ‘risky assets.’ Many of these investors experienced back-to-back crises and they simply don’t trust the markets.”
On average, investors saved only 22 percent of their income, and 44 percent of that is directed toward cash. Interestingly, when investors were polled on what would they do if they won the lottery, 85 percent said they would save the money. Let’s take a look at the top ten nations where retail investors are hoarding cash.