Cash holdings are the worst holdings in an inflationary period. The value of the cash is reduced by inflation.
That’s the definition of inflation.
Money market instruments, what the market refers to as “cash,” may perform very well if short term interest rates spike to bring down inflation. Worked in the early 80’s anyway.
That’s true if you are buying Consumer Products, gasoline, food, etc....
The value of real estate and land will plummet in price when no one will buy them because they are tapped out buying food and other necessities.....
The Dollar will still be the currency of exchange, even if you have gold you have to convert it to cash in order to invest it....
My idea is be ready to purchase hard assets that will hopefully plummet in value....
2008 in the financial meltdown, cash was king back then, Bank of America nearly went under, their stock went to below $10/share, it’s now over $30, you could have tripled your money....
I bought General Electric in the middle of the pandemic, was selling for $6.50/share and was still paying a dividend, it’s now over $13/share having gone over $14/share at one point...I’ve doubled my money in 1 year, all because I had cash....
I would love to buy a few acres of land, not right now, but 1-2 years from now, I think the price will be substantially much lower, you have to have cash to take advantage of opportunity....
You're correct. But sometimes it's the best place to be if you're too old to earn the cash back if you lose it all in some investments like we did in the fall of 2008 before Obama was elected.
We had worked hard to save and invest our money to be able to retire but the stock market had different ideas and we lost more than half the value in those investments before we realized what had happened.
Stung by the losses, but undeterred, we changed out strategy and took our remaining assets out of the market and put them in cash accounts. We sold our rentals and built a new retirement home for cash. Paid off everything else, so we were debt free.
We started a beef cattle operation on a ranch in the country to take advantage of an agricultural exemption offered by the state. Our property taxes dropped to almost nothing. We sell the calves every year at auction to pay for our property taxes on the land and house. The money we lose on the farm and my other small business, I write off on my taxes and pay no federal income taxes. The state has no income tax.
In the ten years since retiring, our savings accounts have tripled in size and we have never lived more comfortably financially than we do now.
It may not be the strategy my financial adviser offered for our retirement, but it's what ended up best for us. As an aside, my financial advisor, who I went to college with, died before he could retire. Karma?
Anyway, there is more than one way to skin a cat when it comes to investing for retirement. We followed our personal instincts and are doing just fine.