CASH IS LIKE MANURE- YOU HAVE TO SPREAD IT AROUND TO MAKE YOUR INVESTMENTS GROW!

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I have recently read several articles stating cash is awful. It concerns me so much, I am willing to make the ultimate sacrifice and take that EVIL cash off your hands. Just mail that evil paper money to me!

In reality, we use cash to buy assets that hopefully will increase in value AND beat inflation. Every investment I have made (good and bad), came from cash – home down payment, rental properties, S&P 500 ETF shares, Apple stock, etc., all came from cash.

As a kid, I use to love to hoard cash. Some kids collected dead butterflies (personally never understood that) and I collected cash! Not under my mattress, but between the covers of my Nancy Drew series books. And yes I know NOW, Nancy Drew was written for girls! I loved her stories, thank you very much. But eventually I would move that cash to a savings account and ultimately I used it to help fund my college education. An investment that did appreciate and beat inflation!

So why do so many articles insist cash is as evil as (pick your least favorite politicians-actually just pick a politician)? Reality – cash has an undeserved bad reputation because it loses buying power over time, due to inflation. If our parents saved $1,000 in 1960, in some great hiding place (NOT the fireplace!) and we find it, the problem is we need about $8,000 today, to buy what $1,000 would have paid for in 1960. That is the power of inflation and why we must put majority of our cash to work HARDER THAN WE DO! With today’s meager and INSULTING bank savings accounts interest rates, it will take you about ~ 800 years (give or take a decade) to double your money at a typical bank. Now I know medical technology is improving life expectancy, but lets be real- NOT THAT MUCH!

There is absolutely nothing wrong with cash as long as you are not hoarding it FOREVER! The value of cash depends on what you do with it. If you leave money in your savings or checking accounts too long, at today’s interest rates, it will lose value. But here is what you can do with cash to beat inflation and build your net-worth:

• Maintain your emergency funds. Reminder you want access to six months of expenses dollars. All of this does not have to be in cash. You can leave 1-2 months in cash and invest the remainder.
• Invest in your own education
• Down payment on a house
• Upgrades on your home
• Invest in your Retirement accounts, such as 401-K, or ROTH IRA
• Invest in your Non-Retirement Investment accounts
• Invest in shares of Mutual Funds, Exchange-Traded Funds (ETFs), FANG Stocks (Facebook, Amazon/Apple, Netflix and Google (Alphabet), etc.
• Start your own side or full time business
• Invest in real assets that produce cash flow (rental property)

To increase your net-worth you need to be smart with your cash and put your HARD EARNED MONEY to work as soon as possible. So, if you are holding cash for any of the above reason or your own future investments, here are the best interest rates. Get the most you safely can while holding your cash.

Best interest rates on cash: http://flip.it/f_Q-DP

CONCLUSION

In the short term cash is a safe asset in the U.S. Socialist countries- not so much due to inflation that can exceed triple digits. Looking ahead, it is impossible to know how much your cash will buy in future.

Cash has experienced a ZERO real return after inflation since 1996. Due to the last rate hike, investors can now expect to have real returns of roughly ZERO percent in cash positions in the near term. As the Fed continues to hike short-term rates, real returns might however turn positive, assuming inflation doesn’t increase much above the Federal Reserve’s target of two percent.

The consensus recommendation is, investors hold enough cash in their portfolio to enable transactions and also cover the next six months of spending needs, but no more. For most families, that will be an allocation of 5% or less of their overall portfolios. Investors looking to reduce market risk, whether due to a change in life circumstance or to express a market view, are better off shifting to a more-conservative but still fully-invested portfolio.

DISCLAIMER

I am an investment and finance blogger, with my Rutgers, MBA and Harvard, Advanced Management. I am a successful investor in equities and real estate and happy to share my personal finance and investment lessons learned with you. I am NOT a licensed financial advisor. Please do not construe my suggestions on this blog, as recommendations for your personal situation. For individual finance advice please seek your own licensed CPA or financial advisors.

Powers Investments Management, LLC

This blog will provide, information and simple strategies, that will assist you to achieve YOUR financial objectives and long term targets. For over 30 years, I solved multi-million dollar problems, for Fortune 10-250, companies. My formal education includes: Business, Finance and Chemical Engineering {Problem Solving} at: Harvard, Rutgers and North Carolina State. And an additional 30+ years, managing my family’s investment decisions. I currently manage/advise people with net-worths ranging from the tens of thousands to several million dollars.

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