Financial Expert Warns You’re Missing Out on Wealth by Hoarding Money

Financial Expert Warns You’re Missing Out on Wealth by Hoarding Money — Here’s How

Yaёl Bizouati-Kennedy   Tue, October 17, 2023

While inflation is cooling down — standing at 3.7%  in September, according to the Oct. 12 Consumer Price Index (CPI) — it is still a far cry from the Federal Reserve’s 2% target goal. In turn, the Fed seems poised to raise rates at least once more this year — which would continue to put pressure on Americans’ wallets.

Against this backdrop, it’s no wonder that some may find the “cash is king” mantra attractive. Yet, experts warn that you could be missing out on wealth by hoarding money.

Why Does It Hinder Building Wealth?

If all of someone’s assets are held in cash, they forgo the wealth-building potential of stocks, stock mutual funds and ETFs (exchange-traded funds), as well as other equity assets, said Dr. Barbara O’Neill, CFP, AFC, CRPC, at RetireGuide.com and owner and CEO of Money Talk.

“It is simply an opportunity cost question; i.e., losing the opportunity to earn higher returns elsewhere,” she said in her statement to GOBankingRates.

O’Neill added that money grows slower in cash assets than it does in equities. In turn, this means that someone will have much less money saved when they retire if they hoard cash for 20 to 40 working years, instead of maintaining a diversified portfolio.

“Cash assets also generally lose purchasing power due to the effects of taxes and inflation. The after-tax return earned on cash assets is often less than the inflation rate, which means that savings dollars will buy less,” she added.

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https://news.yahoo.com/finance/news/3-top-stocks-gain-inflation-115800459.html