Merryn Talks Money Jim Reid on Why Cash Is the Riskiest Investment of All
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Nov 17, 2025 Jim Reid, Head of Macro and Thematic Research at Deutsche Bank, shares insights on why holding cash can be the riskiest long-term investment. He highlights that inflation and historical negative returns on cash often make equities a better choice. The discussion touches on the significance of starting valuations for predicting long-term returns, gold's performance amid inflation, and the potential impact of AI on productivity and markets. Reid also warns about the sustainability of developed-market debt and emphasizes the importance of buying low to maximize returns.
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Cash Is The Long‑Term Risk
- Holding cash long term is riskier than many fear because inflation erodes purchasing power.
- Over 200 years cash returned about -2% real per annum, so cash is effectively a losing asset over time.
Tilt Portfolios By Valuation
- Use valuations to tilt your long-term portfolio toward cheaper markets or segments.
- Buy low and avoid expensive markets to improve long‑run return probabilities.
Starting Valuations Drive Outcomes
- Starting valuations strongly predict long‑term equity returns across decades.
- Low PE portfolios historically delivered much higher compound returns than high PE portfolios.