It seems that young investors are Hoarding cash at alarming rates and leaving their savings to sit on the sidelines not earning any kind of income. Interest rates on cash investments are at all time lows while the stock market is booming and reaching record highs. So why are these young investors hoarding cash at increasing amount. They are missing out on the stock market gains that have taken place over the last six years since 2008. The markets have almost doubled since 2008 and your investments should have done the same. Sure there has been lots of ups and downs, but the overall trend is aggressively up!
Hoarding Cash – 2008!
The answer is the stock market crash in 2008. Also the corresponding housing crisis that started that year and continued for several years after that. Consumers who owned homes that were heavily mortgaged lost those homes. The value of the homes went down so much, well below the value of the mortgage. The stock market crashed. Anyone who sold their stocks because they thought they were going lower locked in those losses. They never got back in the market. They lost big time. As we update this post there is another correction taking place in the fall of 2018. It may be time to take advantage of this correction and get back in the market. Invest in dividend paying stocks that have a long history of paying dividends. At least this way you will also derive some income from your investments.
The Answer for Many is Hoarding Cash
Many people are now hoarding cash figuring that if it is not invested in anything risky they cannot lose it. They also cannot take advantage of the increases in the stock market and housing either. The stock market as more than doubled since 2008 and homes are now well on the way to rebounding back to what they were pre 2008. Meanwhile those people sitting on cash are not only missing these gains, they are also losing in another way as well.
Inflation continues unabated at around 2% which means that the $100 in cash you had sitting in the bank last year will only purchase $98 worth of goods today. next year it will only purchase $96 and so on. Inflation is silent and sneaks up on all of us and if you are sitting on cash you are actually losing money every year. If you have to pay any tax on the small income you do get on your cash, it only gets worse in terms of the money you have to spend on everyday living expenses.
The young investors have missed the boat in terms of the stock market gains, however they can still purchase dividend paying stocks from companies that pay well, have a record of paying every year and have a record of increasing their dividend each year as well.