Investors Choosing Cash
In a recent survey, U.S. investors from various backgrounds were asked for their top choice for a long-term investment. Over 25% of respondents chose cash and cash-related investments, ahead of other assets such as real estate, stocks, and bonds. This may seem surprising given that cash currently yields 0%, and it has been one of the worst performing asset classes over the last ten years, earning just 1.7% annualized while inflation has averaged 2.5%. What seems to many as the top solution has the potential to hinder long-term investment goals because its returns haven’t kept up with the rising cost of living. While it’s understandable for investors to be wary, given the volatility we’ve seen over the past 10 years, it is worth pointing out that not being invested in the markets may not be the answer. We believe it is more important for investors to have an appropriately diversified portfolio tailored to their risk-tolerance and time horizon.
The complete Financial Security Index Survey for July 2013 can be seen at: http://www.bankrate.com/finance/consumer-index/financial-security-charts-0713.aspx
Sources: JP Morgan Asset Management and Bankrate.com
Author: Chad Sander (Bio)
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