How to use Cash Park

What is Cash Park, and should I consider it?
How to use cash park
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Everybody is different, and people invest for a variety of reasons. Some are happy to take big risks to maximise their profits as much as possible. Others want to keep their investing as risk-free as possible with the aim of beating the rate of inflation. Managing your level of risk is something that we strongly believe in at Wealthify, which is why we offer five Plan types, allowing for pretty much everyone to invest in a way that’s right for them.

But markets can be turbulent and some swings may make you feel as though the risk of investing outweighs the benefits. During the uncertainty surrounding Brexit, many investors became very risk-averse, which lead to us creating a feature that we call Cash Park.

What is Cash Park?
Cash Park is a tool we’ve built to reduce the amount of risk you’re open to with investments. We do this by taking some, or all, of your money out of investments and hold it in cash. This allows more protection over large market movements while keeping your money readily available to be invested again once you’re confident in the direction the markets are heading.

The key benefits of Cash Park include:

  • Removing market risk by un-investing your money
  • The funds stay in your ISA allowance
  • It’s faster for us to invest cash parked funds than receiving new payments
  • You won’t pay management fees, or fund charges, on this amount

We’ve created an entire blog if you’re interested in finding out more about how Cash Park works.

When should you consider using Cash Park?
At Wealthify, we believe that investing is for the long term, as the longer you invest for, the more likely you are to see a return. However, sometimes there are bumps in the road. These bumps may be things that you can see coming, like a General Election, while others seemingly come out of nowhere. Cash Park is a tool that’s been designed to help you reduce the level of risk you’re exposed to over a short period.

That’s an important thing to note. Cash Park is intended to help mitigate short term risk. You won’t receive any interest on this amount or benefit from positive changes in the market until it’s reinvested.

It’s also worth noting that nobody can predict what the market is going to do. You could choose to park your cash in fear of the markets dipping – for example, at a General Election – but the markets could go the other way. If this happens, your parked cash will not buy as much as you had previously.

When to park your cash should ideally depend more on your personal circumstances than what you think the markets are going to do.

You don’t have to move all your money into Cash Park either. For example, if you had £10,000 invested, you could put £5,000 of that into Cash Park – effectively reducing your risk by 50% but still leaving 50% of your money invested to benefit from any positive market movements. You can access this tool if you have £100 or more invested with us. 

When not to use Cash Park?
Cash Park is an incredibly useful feature when used properly, but it’s built for the sole purpose of helping you avoid short term turbulence in your investments. While you are free to use this tool how you see fit, we did not design Cash Park to be used as a long-term solution, or to help time the markets, or as an alternative to a Cash ISA.

Although it can be used effectively in removing the risk from investing, you are also taking a risk by selling your investments to hold cash. If the price of your investments has been falling, then by selling to Cash Park, you will make these losses real. Say, for example, you had £10,000 invested but recent market dips dropped that amount to £8,500 – to Cash Park at this point you’ll have lost £1,500. If you were invested for the long term and left your money untouched, then the markets could have recovered, and you may have been back in profit.

 

Timing the markets is really hard
At Wealthify, we have an entire investment team dedicated to analysing and monitoring the markets to maximise the performance of our Plans and trying to beat the rate of market returns. That’s their full-time job, and there’s quite a few of them. And guess what? They don’t try to time the markets, instead, they focus on maximising benefit from time in the market.

There are points where you don’t think the markets could rise any higher, and then they do. Whilst there are other times when everything looks like it’s going down and then the markets suddenly bounce back up.

The thing with timing the market is that it rarely works. And trying to time the market could actually end up harming your investments by potentially missing out on some of the good days when all you wanted to do was avoid the bad.

Other ways to reduce your risk
We understand that your attitude towards risk can change over time and wanting to protect your money can become more of a priority than making gains. If this sounds like you, then there are a number of things you can do to that may reduce your risk.

The first, and perhaps most obvious thing you could consider is your current investment style. If you choose to lower your risk then it will reduce the allocation of shares in your Plan, and instead increase things like bonds, cash and property, which are typically less volatile.

At Wealthify, we have five investment styles that are based on levels of risk, from Cautious to Adventurous. If your circumstances have changed and you want to move from a more Adventurous Plan to one that’s more Cautious, then please talk to our Customer Care team.

Another strategy you could adopt is to pay into your investment account little and often. Although it doesn’t sound like much, it’s actually referred to in the investment world as pound cost averaging. The theory, in a nutshell, is that by topping up your investment account regularly you’re buying at lots of different prices. This means that you’re far more likely to buy into the dip and give your investments more long-term potential than if you invested a lump sum and bought at one price. Interestingly, by using this technique consistently and ignoring market lows and highs, you could reduce the impact of large market movements.

How to activate Cash Park?
If you’ve decided that Cash Park is the right move for your investments, then you can activate it by logging in to your Wealthify account. Choose which Plan you want to apply this to and select the option of ‘Park some of my plan in cash’. You’ll then be able to decide what percentage you park – it can be anything from 1% all the way up to 100%.

This process is a little bit different on our app. You’ll need to select ‘withdraw’ and then choose our ‘Cash Park’ option on that page. This will take you through to another screen that tells you more about the ins and outs of this feature, before letting you select how much to Cash Park.

If you have any questions about Cash Park, our Customer Support Team will be happy to help. You can call us on 0800 802 1800 or contact us via our Live Chat.

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