Affinity "Mark" et Minute - October 25, 2023

Affinity “Mark” et Minute – October 25, 2023

Investment Commentary –October 25th, 2023
Year to Date Market Indices as of October 25th, 2023
• Dow 33,053 (2.31%)
• S&P 4,188 (13.32%)
• NASDAQ 12,820 (22.73%)
• OIL $85.39 (6.06%)
• Barclay Bond Aggregate (1.15%)
• Gold $1,994 (8.98%)

Why Holding Too Much Cash on the Sidelines Can Set You Back

Having too much cash sitting on the sidelines in a money market fund might seem like a safe move. But history shows there’s an opportunity cost to playing it too safe. Simply put, cash has less growth potential and most likely won’t help you reach your long- term goals. Here’s some practical advice to help you stay invested and funnel idle cash back into the market in a prudent way.

The opportunity cost of holding cash
The bar charts below show how little growth an all-cash portfolio produced compared with a traditional 60/40 balanced portfolio over five years and then extended over three decades. Investors who employed a systematic investing approach and regularly contributed to a diversified investment account with a healthy mix of stocks and bonds generated much higher returns. The all-cash investor, despite the perceived safety of cash, left a lot of money on the table. Even with periodic market downturns, history shows that markets eventually rebound, recoup their losses, and ultimately move higher and outperform cash by a wide margin. A systematic approach to investing helps control emotions, puts your savings on autopilot, and allows you to benefit from compounded returns.

STEADY CONTRIBUTIONS TO A 60/40 PORTFOLIO—RATHER THAN CASH—PRODUCED A BIGGER BALANCE OVER THE SHORTER AND LONGER TERM

An investor using a systematic investment strategy who invested $12,000 in a 60/40 (stocks/bonds) portfolio at the start of every year, or $1,000 at the beginning of each month, for five years or 30 years, would have generated a larger nest egg than an investor who executed the same strategy but stashed the money in a cash account over those time periods.

Sources: T. Rowe Price, created with Zephyr StyleADVISOR; S&P; Bloomberg Index Services Ltd. See Additional Disclosures.
Past performance cannot guarantee future results. It is not possible to invest directly in an index. Chart is shown for illustrative purposes only. Stocks: S&P 500 Index, bonds: Bloomberg U.S. Aggregate Bond Index, and cash: Bloomberg 1–3 Month Treasury Bill Index. As of June 30, 2023.

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.

https://www.marketwatch.com/ (Market Indices)
https://www.jhinvestments.com/weekly-market-recap (Around the Web & Upcoming Events)
https://finviz.com/groups.ashx (YTD Performance Chart)
https://www.jhinvestments.com/weekly-market-recap#market-moving-news
https://www.cnbc.com/2023/06/12/stock-market-today-live-updates.html
https://www.troweprice.com/financial-intermediary/us/en/insights/articles/2023/q3/why-holding-too-much-cash-on-the-sidelines-can-set-you-back.html

About the Author: Mark Roberts

In addition to managing clients’ money and giving investment and diversification advice, Mark offers something that “the other guys” don’t - a unique approach to Retirement Tax Strategies and distribution. Time and time again, Mark meets with new clients who tell him they have a great relationship with their financial advisor but have never been offered information on this kind of approach to securing their financial futures. Mark has taken this feedback to heart and works tirelessly to ensure that his strategies focus on taxes and distribution. Mark started selling insurance for a major insurance company right out of high school to help put himself through college. After graduating with a degree in finance, he dove into estate planning on the financial side to set himself apart from other financial advisors. However, as changes were made to estate tax laws over time, Mark shifted his focus to income tax strategies. Mark’s philosophy is “the blue prints are more important than the wall paper or carpet.” The wall paper and carpet represent products like investments and insurance policies, whereas the blue prints represent the strategies. Once strategies that truly fit the client’s needs are put in place, our focus can shift to providing you with the right products. According to Mark, “It doesn’t matter what carpet we use if the walls are not in the right place.” Our approach to money management is designed to generate the largest alpha (quality) with the lowest standard deviation and beta (risk). By doing this, we help provide clients with the highest return on the lowest risk. Generating income for our retirees is also very important. Because withdrawing money from your portfolio hurts the account rather than helping it, our goal is to design income strategies to harm the portfolio the least making the money last longer.

Affinity “Mark” et Minute – October 25, 2023

Affinity “Mark” et Minute – October 25, 2023

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About the Author: Mark Roberts