SMART CHART – Real Return of Cash

Chart of the day shows compound annual returns for stocks, bonds and cash, june 2013

SAM RO

When investors get scared and they have nowhere to hide, they move their money to cash.

Cash is arguably a great place to store your wealth briefly until you make your next investing move.

However, cash itself is not really an investment.

“The one thing I will tell you is the worst investment you can have is cash,” says Warren Buffett.

Why?

Inflation.

“Perhaps it is self-evident, but it is worth reminding ourselves that inflation is the major downside of holding cash,” write the folks at BlackRock. “Even in the low-inflation environments in much of the developed world, returns on cash have not kept up with consumer price increases. So the value of cash diminishes in real, or inflation-adjusted, terms over time.”

 

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