We are crawling out of the Great Recession, we are haunted by devastating equity bear markets, and we are scarred by the extreme ups and downs in investments. It is a lot to stomach and it's why many investors have moved to the sidelines.
For a lot of investors, that means switching into what many people view as a riskless trade: cash. Putting a significant portion of your portfolio into cash may seem like a good idea when times are uncertain and volatile. But there is a cost. Cash has produced negative returns after factoring in inflation and taxes. Past performance is no guarantee of future results, but we can guarantee this: Holding cash is a sure way to lose buying power in the long run.
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