Cash is a Position – But Not Necessarily For Ever

No matter what the wealth managers say about it, cash is a position especially in times of crisis like now. Cash is a position but that does not mean you will be in cash forever. The way they tell it is will not protect you and you could miss out on the next bull market.

So for that reason you should gamble some or all of your nest egg in a market that no one can understand right now. That makes good sense and is really professional – I don’t think.

They conveniently forget that in the 70′s the stock market made virtually no capital gains and inflation was running at double digits. How did stocks protect your nest egg against inflation then?

Unless the whole world goes into financial melt-down, cash in your bank account is what you need to reduce some of the panic we all feel. Baby Boomers are especially vulnerable to a recession/depression at this time.

Giving more of your money to your fund manager right now makes no sense either. It is better in your bank where you can control it, until the world sees its way through this financial crisis.

If you cannot stop payments into your retirement funds you can arrange for those payments to be held in a cash account rather than re-allocated into equity, property, fixed interest and other risky assets. So get on the phone to your financial planner, employer fund manager or whoever and make sure it happens.

Forget the fact that interest rates are low and going down for now. Inflation is likely to fall in the short term as the demand for goods and services declines. What if you lose 5% of your money due to inflation this year – that’s a whole lot better than losing 30-40% in the stock market.

If you have cash, use this time to replace all your old high cost home appliances and your car. If you can negotiate significant discounts this is an inflation fighter right there.

GM’s car sales are down 45%, Toyota reported a 69% drop in profit. Retail sales with massive discounts seem to be everywhere and this is normally the best time for retailers as the Christmas demand comes on.

More Stimulus packages are unlikely to do the job they are intended to do. Many consumers will not spend any government handout, apart from maybe buy some Christmas presents. Much of the money will go to reduce debt by paying off the mortgage or the credit card debt.

It’s time for me to state once again I am not a financial planner and anything I say you should check out with your trusted financial adviser before doing anything. Your personal circumstances should be taken into consideration before doing anything I talk about on this blog 🙁

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