Cash is the most easily recognised ‘investment’ for inexperienced investors as most people are familiar with the process of saving money in a bank account and receiving interest payments from a bank.
In recent years, interest rates have not delivered for savers and many have complained that their savings have diminished in value. This is mostly the case because inflation has outpaced interest rates,
Unless an individual is signed up to a ‘club’ with their bank that delivers a higher interest rate, the typical rate delivered to savers is below 1% (as of 2020).
When the inflation rate is above 1%, people that save their money in the bank lose out – in the UK, the inflation rate tends to be around 2% a year.
Similar to company-specific unsystematic risk, sector-specific risk is also an unsystematic risk.
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