Start Earning Serious Interest On Your SavingsSubmitted by LWM | Linden Wealth Management LLC on August 21st, 2019
It might seem trivial, but how you manage your cash can have a long-term impact on your net worth.
Don't leave a lot of cash just sitting around earning nothing. Checking and savings accounts make on average 0.08%. Brokerage accounts aren't much better, and with inflation running at 1.8%, your purchasing power quickly erodes.
Cash should be managed and viewed as the liquid part of your investment portfolio. With little additional risk, an investor can place cash in ultra-short bond funds such as Vanguard's VUSFX or BlackRock's NEAR. These funds seek current income with limited price volatility. Over the last three years, VUSFX's price has ranged from $20.00 - $20.11 yielding around 2.64%. NEAR's track record is similar.
Suppose you had $100,000 in cash in various accounts making 0.08%, you'd earn about $80 annually. If instead, you invested in either VUSFX or NEAR you'd have $2,640. That's an additional $13,200 over five years. You might not have $100,000 sitting around, but you get the point.
There's a serious opportunity cost when cash earns next to nothing. The only one benefiting is the bank. With a little bit of forethought and management, you can make a lot more with low additional risk. Think of that vacation it will fund or the next night out on the town.
As a fiduciary and fee-only advisor, I don't make money by selling financial products. I'm free to recommend the strategies and investments that make sense for couples and individuals, based on a clear understanding of where you're headed in life.
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*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.