Perceived Safety… At A Cost

In Interest Rates, Investment Planning by Landmark Financial Advisors, LLC0 Comments

In the current low-yield environment, it’s not uncommon to see low interest rates on Money Market Accounts.  We view these “safe” havens as a tactical or temporary resting place, and feel you should not be allocating investment funds to this asset class on a long term basis.  What you may not realize is that even if interest rates go up, it still is not a good long term place to invest.

The following chart is a great example of why you need to evaluate safety after factoring in the effects of inflation:

02_How_We_Got_Here_MCH1

1. Sources: Money Market Accounts’ Average Yield: BanxQuote®. Copyright ©2013 BanxCorp. All rights reserved. BanxQuote® is a registered trademark and servicemark of BanxCorp. Inflation: Bureau of Labor Statistics. Inflation is represented by year-over-year changes of the Consumer Price Index (CPI) plotted on a monthly basis. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE PERFORMANCE.

 

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