You can help move a mountain (of cash) - Ahwatukee Foothills News: Money

default avatar
Welcome to the site! Login or Signup below.
|
||
Logout|My Dashboard

You can help move a mountain (of cash)

Print
Font Size:
Default font size
Larger font size

Posted: Sunday, March 17, 2013 2:49 pm

In an uncertain economy, it’s natural for people to “tighten their belts” by cutting down on their spending. And yet by having too much cash on hand today, you could actually slow your progress toward your financial goals of tomorrow.

Before we get to the possible pitfalls of hoarding cash, let’s consider your fellow Americans’ recent savings habits:

• How much? In the last quarter of 2008, the personal savings rate was 2.9 percent, the highest level since the third quarter of 2001, according to the U.S. Department of Commerce.

• Where? People are putting their money in what they consider safe vehicles. At the end of 2008, the ratio of money market fund assets and bank savings deposits to stocks — as measured by the Wilshire 5000 Index, one of the broadest market indices designed to track the overall performance of the U.S. stock market — was 95.4 percent, according to Ned Davis Research (keep in mind that the Wilshire 5000 index is unmanaged and not available for direct investment). This ratio is the highest it’s been since money market accounts were created in the early 1980s.

Of course, given the stock market decline, it’s not surprising that so much money is going into these accounts, because people are looking, above all else, to preserve their principal. Consequently, as a nation, we are now sitting on a “mountain” of cash.

However, the trip up this mountain does not come free. While it’s true that these vehicles may help preserve your principal, they may not provide you with returns that can keep up with inflation, which means that the more of these instruments you own, and the longer you own them, the greater the likelihood that you will lose purchasing power.

Furthermore, if you’re putting most of your assets into cash, you’re incurring “opportunity cost” — the chance to invest that money into vehicles that have the potential to provide the growth you need to help achieve your long-term goals, such as an enjoyable retirement.

So here’s the situation: On the one hand, you have a tough economy and a stock market that has probably already saddled you with losses. On the other hand, you need to consider investing in stocks or other growth-oriented investments to help you reach your long-term goals. What’s the solution? Balance. There’s probably a place in your portfolio for short-term instruments whose chief benefit is helping to preserve your principal. But you may need to balance these holdings with investments that can potentially reward you with growth. The exact mix of assets depends on your risk tolerance, time horizon and individual goals.

In these days, you may need a leap of faith to invest some of your cash. But history is on your side: Downturns have typically been followed by market rallies. Plus, we may eventually see cash seeking higher returns, and that should have a positive impact on the financial markets.

It may feel comforting to have a lot of cash on hand. But if you’re planning for the years ahead, you should consider putting some of that cash to work.

• This article was written by Edward Jones for use by Ahwatukee Foothills Edward Jones Financial Advisor Joseph B. Ortiz, AAMS, CRPS. Reach him at (480) 753-7664 or joseph.ortiz@edwardjones.com. Accredited Asset Management Specialist and AAMS, Chartered Retirement Plans Specialist and CRPS are registered service marks of the College for Financial Planning.

More about

More about

More about

  • Discuss

McDonald's Golden Arches First Appeared In Phoenix

Published: Wednesday, July 27, 2016 - 3:22pmUpdated: Wednesday, July 27, 2016 - 3:32pm downloadBurgers, fries and shakes—all of those probably…

Published: July 28, 2016 - 11:02 am @ http://kjzz.org/content/341731/mcdonalds-golden-ar…

Texas-based Bush’s Chicken coming to Gilbert – and they’re bringing car hops

A few weeks ago, a reader asked if I knew what was being built on the southeast corner of Val Vista and Williams Field in Gilbert. It looks li…

Published: July 28, 2016 - 10:32 am @ http://mouthbysouthwest.com/2016/07/28/texas-based…

The Daily 202: Democrats claim patriotism, God and American exceptionalism at convention

THE BIG IDEA: PHILADELPHIA—Democrats are now playing offense on the three G’s that dogged them for so many years: God, gays and guns. Republic…

Published: July 28, 2016 - 10:32 am @ https://www.washingtonpost.com/news/powerpost/palo…

UPDATE: Western Union Anti-Money Laundering Settlement Agreement

For Immediate Release: July 28, 2016Contact: Mia Garcia (602) 339-5895 or Mia.Garcia@azag.gov PHOENIX – Attorney General Mark Brnovich announc…

Published: July 28, 2016 - 10:28 am @ https://www.azag.gov/press-release/update-western-…

Katie McGinty’s Controversial Past

At a swanky League of Conservation Voters dinner last month in Washington, D.C., Pennsylvania Democrat Katie McGinty, who is running to unseat…

Published: July 28, 2016 - 10:25 am @ http://www.nationalreview.com/article/438418/penns…

Mark Burns' amazing journey to photograph every national park in the U.S.

When photographer Mark Burns was growing up in Houston, he didn’t have many everyday opportunities to gaze upon great mountains and sweeping v…

Published: July 28, 2016 - 10:24 am @ http://houston.culturemap.com/news/arts/07-27-16-m…

Paul Babeu Slams GOP Primary Rival Wendy Rogers

Stephen Lemons A A If there's one single quality that former U.S. Air Force Lieutenant Colonel Wendy Rogers has in spades, it's moxie. One of …

Published: July 28, 2016 - 9:57 am @ http://www.phoenixnewtimes.com/news/paul-babeu-sla…

67 Congress Members Tell Feds: Measure the Movement of People, Not Cars

The federal government hands states about $40 billion a year for transportation, money they can basically spend however they want. The result …

Published: July 28, 2016 - 9:57 am @ http://www.streetsblog.net/2016/07/28/67-congress-…

LGBT Advocates Urge District Court Not to Let States Game the System

Five leading national civil and LGBT rights organizations late yesterday filed an amicus (friend-of-the-court) brief in the multi-state lawsui…

Published: July 28, 2016 - 9:27 am @ http://www.lambdalegal.org/blog/20160728_lgbt-advo…

The Grass Isn’t Always Greener

This is HR’s go-to advice for employees who put in their two-week notice, especially if that employee is heading to a competitor: “Just rememb…

Published: July 28, 2016 - 9:01 am @ http://timsackett.com/2016/07/28/the-grass-isnt-al…

Facebook

ahwatukee.com on Facebook

Twitter

ahwatukee.com on Twitter

RSS

Subscribe to ahwatukee.com via RSS

RSS Feeds

Spacer4px

Most Popular

Online poll

Loading…