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Why Are You Sitting In Cash?

December 18, 2017

Far too many investors are sitting with far too much cash in their portfolio. What’s worse, they have been sitting in cash for years, waiting for a correction that may not happen for some time. When asked why, they reply, “The market has gone up so much recently that it HAS to correct.”

Why? When? Based upon what research? No one, and I do mean no one, knows when the markets will correct. But for a moment, forget about the media. Don’t look at a chart of the S&P 500 or the Dow Jones Industrial Average.

A broken clock is correct twice a day, so if you insist that the market is going to correct you will eventually be correct. We are four years into our secular bull market (see graph below). The average secular bull market lasts 14 years. The shortest secular bull market ever was nine years. This doesn’t mean that we won’t experience a correction or two along the way. Look at the secular bull market in the eighties. It went from 1982 to 2000, eighteen years of generally up markets. Within that timeline you had the 1987 stock market crash, the 1990 recession, and the 1994 recession.

S&P Composite Index - Log Scale Annual

A closer look at our current secular bull market (seen below), which began in 2013, shows a very normal secular bull market. No market goes straight up or straight down. The S&P 500’s price dropped by 0.7% in 2015, and January 2016 was extremely challenging.

S&P companies went through six quarters earning recession

Again, I can’t tell you that the markets won’t correct, no one can. What I can tell you is we are four years into our secular bull market. It should last for another five to ten more years if it were going to fall into normal ranges.

Leaving your money in money market funds guarantees that you will lose your buying power:

 

  • According to Bankrate.com, the top 10 best money market rates are yielding between 1.30% and 1.50%
  • Current inflation rate is 2.0%, core inflation
  • Sitting in cash is guaranteeing yourself to lose 0.50% to 0.70% of your buying power every year

 

A market correction could happen at any point. Is it likely? I don’t think so. There are far too many good things going on to derail this current rally. The question really is, “How long are you willing to wait in order to be correct? How much is that going to cost you?”

Please talk with your Polaris Greystone advisor to have them review our investment strategies with you to determine which one will be best for that cash you are sitting on.

We look forward to meeting with you.

 

 

 

  

 

   Sincerely,
   Jeffrey J. Powell
   Managing Partner

 

 

 

Polaris Greystone Financial Group, LLC is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. This material does not take into account your particular investment objectives, financial situation or needs, is not intended as a recommendation to purchase or sell any security, and is not intended as individual or specific advice. Investing involves risk and possible loss of principal capital. Diversification does not ensure a profit or protect against a loss. Advisory services are only offered to clients or prospective clients where Polaris Greystone Financial Group, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Polaris Greystone Financial Group, LLC unless a client service agreement is in place.

 

 

 

Categories: Polaris Greystone Financial Group, LLC.

Tags: Capital Gains, Disciplined Approach, Disciplined Investing, Economic Data, Economic Indicators, Economy, Index, Investing, Investments, Market, Market Outlook, market performance, Market Sentiment, Markets, Media

 

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