UK investors took two very opposite approaches to their savings last year, with some buying into high-risk crypto assets while others held all their capital in cash, according to new data by Boring Money.
The survey of 6,000 people revealed that the number of UK adults aged 45 or below that owned crypto assets doubled in 2021 as investors piled into the controversial asset class.
But not all were as positive, with an estimated 6.6 million people with more than £10,000 in savings deciding not to invest at all.
This highlights the dichotomy of opinions on whether now is a good time to invest, with inflation and interest rates on the rise, political tension between Russia and the rest of the world, and the remnants of the Covid pandemic.
Holly Mackay, chief executive of Boring Money, said: “There is a ‘book end’ effect in the DIY investment market today. At one end we have millions of people in cash, with significant balances, and no investments. At the other we have some relatively inexperienced, mostly younger investors holding extremely volatile assets.”
Young people with crypto holdings reached 12% last year, significantly higher than the 3% of over 45s. Overall, 7% of UK adults are invested in crypto while a further 3% have held crypto in the past.
Number of UK adults invested in crypto in 2021
Source: Boring Money
Currencies such as Bitcoin and Etherium have rocketed in value over the past 10 years, but the Financial Conduct Authority (FCA) is trying to tighten regulation in the crypto market as scammers target the waves of new investors.
James Yardley, senior research analyst at Chelsea Financial Services, said: “Crypto is super high risk and speculative and investors should be prepared to lose whatever they put in. That said I believe the risk reward is still good given the potential upside.
“Obviously not all crypto will do well and there is a lot of rubbish out there in a completely unregulated market. I would urge anyone to do research and actually use the networks before they even think about investing.”
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Boring Money’s report also revealed an increasing popularity for holding cash, with many people choosing to keep hold of their earnings rather than invest in the choppy markets of 2021.
Households have generally been able to save more during the pandemic, but rising inflation, which reached a 30-year high of 5.5% last month, will lower the purchasing power of savings.
UK adults who held an investment product in 2021
Source: Boring Money
Yardley said: “The central banks seem to have turned from being your friend to your enemy as they fight to get inflation back under control. Given this backdrop it might not be a bad idea to keep a little powder dry although we'd generally advise against timing the market. Cash is also not great with inflation destroying the value of your savings.”
Elsewhere in the survey, one in five retail investors (21%) have less than three years’ worth of investing experience, with 7% investing for under a year.
Of the investors aged 18-24, 40% said that they were encouraged to start investing by a family or friend.
It also found that mobiles are being used more often to track investments, with 43% of investors checking the balance of their account on their phones.
Another 9% said they use their mobile phones to buy and sell investment products, an increase of three percentage points from last year’s data.