The Irish are a reluctant bunch when it comes to stock market investing. Irish households keep 38 per cent of their financial assets parked in cash and deposits, according to a Central Bank report, well above the EU average of 30 per cent.
Europeans themselves are hardly a benchmark of boldness: in the equity-friendly US, households hold just 11 per cent in cash.
In other words, Ireland is an outlier among outliers. Why? Reasons include fear of losses, a perception that investing is exclusive and the belief it is all overly complicated.
Irish households do have equity exposure through pensions but, overall, there is a missing sense of the risk of doing nothing. Inflation, low deposit rates and long time horizons mean sitting in cash is the one strategy that can almost guarantee a loss in real terms. However, it remains the default.
RM Block
Meanwhile, the notion that investing is exclusive only entrenches existing inequalities: those who need their money to work hardest are the least likely to benefit from it.
Sweden is a useful counter-example. Swedes are not inherently more daring, but they have high levels of financial literacy and their system has long made investing feel routine.
Beginning in the late 1970s, the report notes, Sweden rolled out tax-incentivised savings funds, followed in the 1980s by allemansfonder: mass-market equity funds designed to make investing a normal household activity.
Later pension reforms followed, while the arrival of the ISK account in 2012 stripped out friction and paperwork, offering a simple, low-tax wrapper for investing in shares and funds. Today, more than a third of the population uses it. As a result, Swedish households hold only 13 per cent of assets in cash.
Sweden deliberately built an investing culture. The Central Bank’s report implies Irish policymakers should take note.
