Brian and Nolan explain why sitting on cash costs you money. Inflation erodes purchasing power, interest gets taxed as ordinary income, your money doesn't grow, and the dollar keeps weakening. Four reasons to move cash into something that works harder.
So, Nolan, there are headlines out there that make investors nervous. There's no doubt about that. So a lot of investors feel safe sitting in cash in that context. Nolan, why might that be one of the actually the riskiest moves you could do right now?
You know, Brian, if somebody told me that there were investors out there in the world that had millions of dollars just lying in a bank account receiving no interest, I wouldn't believe you. But I believe it now because I've actually seen it myself. There's an issue with investors and cash at the bank not receiving interest. And the way that we look at it is we got a few issues that investors need to take a look at. One, inflation. Inflation's 3%. Whatever I have is a savings needs to go up at least 3% a year so I can buy the same baskets of goods and services. That's right. And if we're not getting 3%, cash is trash. 2, taxable interest. If I am putting my money in the bank in a low-yielding CD or passbook savings account or checking account, the minuscule interest I get is still taxable to me as ordinary income. So if my tax rate is 35%, guess what my bank interest is taxed at? 35%. That's the second reason cash is trash. The third reason is there is no growth. We talked about the markets going up, house prices are going up, everything at the grocery store is going up. But if I have money in cash, I don't have growth. And the last reason is US dollar weakness. Even this year, so far, year to date, the US dollar is down 10%. And if you have your money at the local bank, you probably don't feel it. But if you get on the plane and go to Europe, you're going to feel it acutely. So that's the fourth reason cash is trash.
Well, that's a lot. So the idea that cash is safe doesn't really hold up in today's environment. No doubt about that. Let's put money to work intelligently and not let your cash sit idly in the bank and let the bank make the money. You should be making that money. We've put together a free income securities guide. Download it today. And don't forget to like and subscribe for more timely strategies.
