Given the pain the stock market causes when it crashes, it's tempting to keep all your money in savings accounts where you don't risk your capital.

But being overcautious is a common mistake that costs dearly in the long run.

As the accompanying graph shows, even after the crash of 2008, R100 invested on the JSE 10 years ago would be worth about R500 now, double what R100 in a savings account would have grown to.

Keeping that R100 under the mattress would have been disastrous, as it now takes R182 to buy what R100 could back then.

The graph starts at February 2000 since that's the earliest data I could get for the Short-Term Fixed Interest (Stefi) composite index, the common benchmark for savings accounts. The Stefi has grown from 94 to 239 points, which is not nearly as impressive as the rise in the JSE All Share Index's total return from 645 to 3250 index points.

As the graph shows, you're better off keeping money you may need in the near future in a savings account.

The All Share index oscillates about the Stefi for the first few months, and it is only after four years that the capital growth, plus dividends from shares, start to soar ahead of the compounding interest in the savings account.

Someone who invested R100 on the JSE in February 2000 would have seen their money fall to under R94 in the following months, and only after six months would they have recouped their initial capital.

Many would have cut and run at this stage.

Going to analyst presentations means sitting through the same clichés displayed in PowerPoint over and over.

A particularly irritating one doing the rounds is a quote attributed to Warren Buffett that goes: "Rule No1: Never lose money. Rule No2: Never forget rule No1."

I've never seen this quote in any of Buffett's letters to Berkshire Hathaway shareholders (which are all freely available on the web, so don't waste money on the many paperbacks that cut and paste them).

Furthermore, I doubt that Buffett ever said it, because he usually explains that nobody can predict stock market dips, and that he welcomes crashes as an opportunity to buy more shares at a lower price.

Buffett, along with all other investing veterans, know you will lose money in the short term.

Despite that, the stock market is less risky than savings accounts, where you will barely tread water against inflation in the long term. Instead of removing his shrunken R100 from the stock market to a savings account, a Buffett-style investor would dip into his savings to buy more shares.

This assumes that the person who put that R100 in the stock market in February 2000 did not need it to pay rent in May when it would have been down to R93.72 (while the R100 in the savings account had grown to R102.58).

A key to successful investing is to never be a forced seller, and that requires a backup of savings. A nice cliché, which I've yet to see in a PowerPoint presentation, is Benjamin Franklin's "necessity never made a good bargain".