It's a high quality problem - What should I do with my savings?
It is a very important question though and one which I have always run headstrong into. I love investing - stocks, bonds, property, trees, whole life, businesses, currencies and so on.
What you should you do with your savings is very different than what I should do with mine or what your friends should do with theirs. Here are a few simple questions to help you begin to figure out the answer.
What is an Asset?
An asset is cash or something else you own of monetary value which you can convert into Cash or barter for an equivalent. Your savings are held as Assets.
What are you going to use your savings for?
List out your wishes.. (yes, I love a list)
How many years until each wish?
Liquidity Risk is the risk of not being able to change your asset into cash. Liquids flow freely. The more liquid an asset is, the easier it is to get them to flow into cash.
Next to each wish, scribble in the number of years you hope to achieve that wish.
Any Savings you will need within the next year will need to be held it in the most liquid of assets - some type of Cash account.
The longer it takes to turn an asset into cash, the longer you are exposed to the risk that the price may move away from its value today.
Stocks & Bonds Markets for these and other securities markets vary wildly but once a security is sold, funds are usually clear in 7-30 days.
Property - My UK flat was put on the market and cash was in my account in about a four weeks.It can take 5 years in other less liquid locations with a less sophisticated industry.
Antiques, art, collectible cars - illiquid or very difficult to predict how much or when you will be able to collect money from these assets.
The above chart from Investopedia can be used as a general reference for you to determine where you can hold money for each wish on your list.
With all this risk, why not hold everthing as cash then?
Doing nothing is still a decision with consequences or Opportunity Risk
If you hold your savings as cash over a 10-20year time period and earn 2% and the inflation rate during the same time averaged 4%, the purchasing power of your money will have decreased.
Life involves risk.
You take it everyday.
Getting into airplanes, cars, love.
You have to know what level of risk you are comfortable with and invest only in what you understand and you unlikely to have regrets.