Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by James Nelson, financial planner at NelsonCorp Wealth Management. Welcome back, James.
James Nelson:
Thanks for having me, Brandy.
Brandy Auterson-Hurst:
So the Federal Reserve meets this week and there’s been a lot of talk that they could raise interest rates for the first time in more than three years. What would that mean for everyday investors?
James Nelson:
Yeah, I feel like the group that kind of gets overlooked in this conversation are the savers. And I have a chart here to explain what I mean by that. And this chart shows the total amount of money everyday investors have sitting in money markets, brokerage accounts, money markets with fund companies. And for most of the 2000s and 2010s, you can see that that cash type position held around a trillion dollars or less. But since 2020, that number has really ballooned up and it’s tripled almost to $3 trillion or just over $3 trillion. So the main reason for that is now that the cash pays something, it’s a lot more attractive than it has been in prior years. Cash positions are paying between three and a half and 4%. Keeping in mind, inflation is still running at about 3.5%. And if the Fed does raise rates here in the near term, those money market positions and cash-like vehicles will probably see an increase and probably get some more flows.
Brandy Auterson-Hurst:
So should people be moving more of their money into cash right now?
James Nelson:
Well, we like to emphasize to people that cash has its place and it has its job. It’s more used for short-term income needs, emergency funds, types like that, the one to two year timeframe. Stocks and bonds still do the heavy lifting when you look at the longer term money and the longer term outlook like retirement accounts, that’s stocks and bonds for the most part. All
Brandy Auterson-Hurst:
Right, James, as always, thanks for joining us.
James Nelson:
Thanks, Brandy.
Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.