Cash isn’t just the dollar bills you put in your pocket — in this market, it might seem to be a patch of steady ground.
They may sound like reassuring places to park money while recessions worries persist, and as stocks and bonds try to recover from 2022’s pummeling. But consider these cash returns compared to the performance on the stock market. Even with January’s strong start, the Dow Jones Industrial Average DJIA is down more than 4% year over year. In that time, the S&P 500 SPX is off 9% and the Nasdaq Composite COMP lost nearly 17%.
“Financial planner Ryan Greiser said he was surprised at how much idle cash from clients was waiting for more productive use. ” Take advantage of the higher rates for rainy day funds and reserves, Boyd said — just don’t go overboard. Cash still doesn’t have “double-digit growth potential like stocks do,” Boyd added.
It’s common to hear financial experts describe cash investments as a spectrum of choices where there’s a trade-off between returns and liquidity.Checking and savings accounts Some checking accounts bear more interest than conventional checking accounts. But there are caveats, explained Ken Tumin, senior industry analyst at LendingTree and founder of DepositAccounts.com.
Brokerages also offer “sweeping” services, which sweep uninvested money earns interest while it sits around for the next trade. These mutual funds are comprised of ingredients like short-term, high-quality federal government and municipal debt, along with high-grade corporate debt that quickly comes due.
As the spread in yields from many savings accounts and money market funds widen, consumers would do well to pay more attention to these vehicles, said Kyle Simmons, founder and lead financial adviser at Simmons Investment Management in the Denver area.
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Where does the yield come from? Who wants yield in something that has historically failed to stay within its inflationary target range? Real rates still hurting these people...