What to Do with Cash in a Low Interest Rate Environment
It is no secret that savers are having a difficult time knowing how and where to hold their cash in this low interest rate environment.
Storing money in traditionally “safe” places no longer makes sense and has pushed some into more risky alternatives — such as fixed income securities like bonds and, in some cases even the stock market — in search of yield.
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However, while fixed income securities may offer a potentially higher yield than deposit accounts, they are not a “safe” alternative for storing cash since there is potential risk of losing principal due to longevity and interest rate risk.
So the question is, what do you do when traditional methods for storing money are no longer working? There is an answer, but you must first understand two things:
1. The future is looking to be much different than the past
Looking back, we find that (early 1940s – early 1980s) then changed direction and began a steady decline for the next 30 years (early
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