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Are Investing Concerns Holding Back Saving?

A new survey finds that while Americans are interested in saving, their concerns about investing could be holding them back.

While Americans said that they ideally should have 33% of their net worth in cash instruments, they admit to holding 65% — far too high an allocation to achieve their retirement goals, given low interest rates and the diminishing purchasing power of their cash related to the pressures of inflation. The current asset allocation of American portfolios according to the Global Investor Pulse survey from BlackRock includes 65% in cash, 18% in equities, 6% in bonds, 4% in property, 2% in alternatives, and 5% listed as “other.”

A key obstacle is the feeling of security that cash brings: Nearly 4 in 10 (39%) say they want to have “cash saved as a security blanket or reserve for unforeseen events before I can think about investing.” Furthermore, respondents said that saving money makes them feel secure (39%), hopeful (29%) and confident (28%), while investing money makes them feel risky (37%) and nervous (35%).

More than one-third (36%) of Americans are afraid of taking risks with money or losing money, although only 7% said that they actually have lost a lot of money in past investments.

However, the survey found that there is a group of Americans — which the survey’s authors called “engaged investors” — who keep less than 25% of their assets in cash, and more often they have a formal financial plan and tend to have more positive attitudes about investing overall. The report said they review their investments regularly and are most likely to use online sources and financial advisors to support their decision making. They are also the most willing to take risks in order to achieve higher returns and are the only group who actively ensure that their assets are diversified across multiple investment classes (stocks, bonds, etc.).

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