95% Cash!?

By Wayne Mulligan, on Thursday, February 16, 2017

I couldn’t believe my ears...

I’d been enjoying a pre-flight cocktail at the George Bush Airport in Houston, casually chatting with some folks at the bar. Most of them were well-dressed professionals in their late 50s.

Soon, the topic of the stock market came up—and as they told me, they were no strangers to investing.

But when I asked what they were investing in nowadays, their answers nearly knocked me out of my chair...

This Asset is Not “King”

As I learned, almost every one of them had a major chunk of their assets sitting in a seriously questionable investment vehicle:

Money market funds.

One of these guys had 95% of his liquid assets just sitting in cash!

In a moment, I’ll show you why this is a deeply flawed strategy.

But first let’s look at why these professionals would do such a thing…

Let’s try to understand why intelligent people would be willing to put their hard-earned capital somewhere they’re essentially losing money every day.

Because, unfortunately, you might be able to relate.

“I Literally Can’t Survive Another 2008”

As people approach retirement age, they become more risk averse with their investments.

This makes sense. It’s a prudent strategy.

But with my new acquaintances at the airport, something else was at work here:

You see, like many Americans their age, they experienced something traumatic during the market crash of 2008:

They saw a big portion of their net worth evaporate.

From its 14,066 peak in October of 2007, the Dow tumbled to 6,626 in March of 2009.

Meaning, in just 18 months, millions of portfolios lost more than 50% of their value.

It’s been nine years since the crash, but as it turns out, the effects of that downturn are still impacting people’s investment decisions today.

According to one of the gentlemen I was speaking with at the airport, by keeping his assets in cash, “I won’t get hurt again like I did in 2008.”

He looked at me with hollow eyes. “I literally can’t survive another 2008,” he said.

I felt like grabbing him by the shoulders and shaking him. I mean, I understand his sentiments, but his logic is fatally flawed:

By keeping money in cash, he’s putting his retirement in jeopardy!

And if you’re anything like him, then your retirement could be in jeopardy too.

Can You Afford to Retire?

When you keep your money in cash, you face two major problems:

First, you miss out on the opportunity to put your money to work for you.

Over the last century, for example, despite all its peaks and valleys, the stock market has consistently gone up. Average returns are roughly 6% per year.

And if you believe the stock market is overvalued, or too volatile, you can put your cash in fixed income investments like government bonds.

So there’s no excuse for keeping your capital tied up in cash. There are always ways to put your money to work for you. And that brings us to the second problem:

When you keep your money in cash, not only are you not making money...

You’re actually losing money as well!

Your Worst Enemy

Over time, the price of most goods and services tends to increase.

You can probably remember when it cost just a few dollars to go to the movies. Today in New York City, a ticket will run you nearly $20.

This is inflation. And because of inflation, your money loses buying power over time.

Historically speaking, prices rise by about 3.2% per year.

3.2% might not sound like much, but at that rate, prices essentially double every 20 years. In other words, 20 years from now, your rent, your groceries, your travel… they’ll cost twice as much as they do today.

To put it another way, your money will only buy half as much as it used to.

Meaning, if you don’t grow your retirement nest egg, your savings might only last half as long as you’d planned.

That thought should terrify you. Imagine that you finally retire, you’re finally able to spend time with your friends, family and loved ones....

And then, when you’re 75-years-old, you have to go back to work because you “played it safe” and parked your money in cash!

Thankfully, as I’m about to show you, you can prevent this scenario from happening.

I’m going to show you a way to grow your retirement nest egg without risking it in the stock market. Let me explain...

A Little Bit of This Investment Goes a Long Way

After reading this far, I hope you realize that keeping at least some of your portfolio in stocks isn’t a recipe for disaster. Over time, having exposure to equities will give you a chance to grow your nest egg.

But maybe you’re a few years away from retirement (or you’re already retired) and you want to be certain you won’t lose what you’ve got.

In that case, what should you do?

Well, as you’re about to learn, hope is not lost...

I’m about to tell you about an investment that has nothing to do with the stock market…

But it could allow you to increase your portfolio’s overall returns by 50% to 100%.

And here’s the best part:

To earn those returns, you only need to allocate 5% to 10% of your total portfolio toward this investment.

If you’re a longtime Crowdability reader, you might already have guessed the investment I’m talking about: private equity.

Double Your 401(k) Returns

CNBC recently said that adding private equity to your portfolio is “an easy way to nearly double the equity return that your 401(k) is generating.”

In fact, in a study we conducted two years ago, we found that if you were to allocate just 6% of your assets into early-stage, private investments, you could increase your overall returns by as much as 67%.

The reason this is possible is because early-stage, private investments generate returns that are far higher than what you’ll get with stocks. Historically, private equity has outperformed the public markets by nearly 4-to-1.

Which is why if you can’t stomach the stock market, but you understand that you can’t keep your money in cash...

Then you must consider putting a small portion of your portfolio into the private markets.

Not only can this help you decrease your risk, but it can also help you increase your returns dramatically.

Your Ultimate Retirement Portfolio

Before I wrap up this essay, there’s something very important I need to share with you.

Matt and I have been working on a special project since late last year...

It’s a special resource that gives you a blueprint for how to build your Ultimate Retirement Portfolio.

In the coming months, we’ll be releasing it to a select group of readers...

In fact, if you agree to answer this one question, Matt and I will send it to you absolutely free.

Again, this is a special tool we’ll likely start selling on our website later this year...

But if you click here and answer this one question, you can receive this invaluable resource free of charge.

And all you need to do is answer this one question about how your portfolio is currently set up.

I look forward to hearing from you.

Best Regards,
Wayne Mulligan
Wayne Mulligan


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Tags: Portfolio Asset Allocation Retirement

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