Letter from the Editor: Have you fallen into the ‘confidence gap’?

This week, NatWest revealed it wants another 330,000 customers investing by 2028 — effectively trebling the number of its retail clients who use Stocks and Shares ISAs or investment funds. NatWest has revealed that around 50,000 customers invested for the first time last year, but that still leaves the vast majority sitting purely in cash.

It’s an interesting moment.

Because at the same time, recent research shows just how wide the gap can be between cash and investing over the longer term. While Cash ISAs feel safe and predictable, history shows that investing over the longer-term has reliably delivered stronger returns. The difference adds up over many years. And that ‘compounding’ effect is what really makes the long-term prospects for investors so much more vastly improved than for savers who remain in cash.

The gap

There are more ways into investing as a DIY investor now than ever before. And the entry points to investing are now simpler and cheaper than ever before. So the real barrier today, isn’t access.

It’s confidence.

For years we’ve talked about an “advice gap”. What we really have is a confidence gap.

What about the risk?

It’s completely understandable – and sensible – to worry about risk, about the cost of getting it wrong. But it’s not just the act of investing that’s easier than ever – understanding it is too. Our simple guides prove the point that you don’t need to have a degree in finance to get to grips with the basic concepts. And basic concepts can carry you a long way. There is no need to overcomplicate it. A simple global tracker fund – where the aim is to replicate the long-term growth of the markets, rather than ‘beat’ it – would have been more than enough in recent years to produce noteworthy growth. No stock-picking or ‘timing the markets’ required.

None of this means cash is redundant. It plays an important role when it comes to short-term needs and stability. But if your horizon is five years or more, the bigger risk may be never getting started with investing.

The banks are clearly betting that more people are ready to take that step. The question is whether UK savers are feeling ready to back themselves too.

None of the above is intended to be financial advice and mention of a global tracker fund is not intended to be a recommendation of any specific fund. All investing involves risk and past performance is not a guarantee of future performance.