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)

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 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

Problems with Arizona's licensing process for medical marijuana dispensaries?

PHOENIX (3TV) - As Arizona voters consider whether to legalize recreational marijuana this fall, there are new questions about the state’s med…

Published: August 27, 2016 - 1:27 am @…

Roaming Charges: Bernie’s Used Cars

This week Bernie Sanders started moonlighting as a traveling used car salesman. A month ago, the neophyte salesman volunteered to handle the p…

Published: August 27, 2016 - 12:39 am @…

Book Bangs: THE CRAZY LADY AUTHORS PRESENT Romantically Incorrect boxset

THE CRAZY LADY AUTHORS PRESENT Romantically Incorrect & Erotically Incorrect Fall Crazy in Love with the Crazy Lady Authors Not just crazy…

Published: August 27, 2016 - 12:07 am @

DIY Garage Blog

There’s nothing like a summer road trip. The warm sea breeze flying through your hair as you cruise down the coast. The fresh, piney air as yo…

Published: August 26, 2016 - 11:58 pm @…

Justice Department will probe metro Phoenix sheriff Arpaio

The U.S. Attorney's Office for Arizona said in its brief filing in U.S. District Court in Phoenix that the case has been assigned to the Justi…

Published: August 26, 2016 - 10:55 pm @…

Justice Dept to decide charges against Arizona lawman in racial profiling case

PHOENIX - The US Justice Department will decide whether criminal contempt charges will be brought against Arizona lawman Joe Arpaio for violat…

Published: August 26, 2016 - 10:25 pm @…

Justice Dept. will now decide on bringing contempt charges against Ariz. Sheriff Joe Arpaio

The U.S. Justice Department will decide whether criminal contempt charges will be brought against Arizona lawman Joe Arpaio for violating cour…

Published: August 26, 2016 - 9:55 pm @…

This Week In Political Money: The Super PACs Fighting to Keep John McCain in Office

We’ll be posting this roundup each week leading up to Election Day. Share your thoughts about these must-read stories and always feel free to …

Published: August 26, 2016 - 8:54 pm @…

Trump Campaign CEO Bannon Once Ran Biosphere II Project

Trump's Campaign CEO Ran a Secretive Sci-Fi Project in the Arizona Desert, Mother Jones "Long before Stephen Bannon was CEO of Donald Trump's …

Published: August 26, 2016 - 7:24 pm @

Arizona Rattlers mount furious rally but fall short against Philadelphia Soul in ArenaBowl XXIX

GLENDALE - The Arizona Rattlers rallied from a 21-point first-half deficit but didn't do enough to earn what would have been a record sixth Ar…

Published: August 26, 2016 - 7:23 pm @…

Facebook on Facebook

Twitter on Twitter


Subscribe to via RSS

RSS Feeds


Most Popular

Online poll