If you were like most investors, you have grown up thinking that CDs are a safe place to put your money for the short term. This is only true if you specify what “safety“ means to you. We are entering a world in which CDs are no longer the safe haven some might have imagined them to be. Sure, you may limit your risk to volatile stock markets. Sure, you may reduce your risk of defaults in the bond market. But while you were saving a few dimes with your left hand, you might be spending dollars in your right hand because of inflation.
What to do?
Of course what you should do about this conundrum is as individualized as you are. You and your own personal financial situation must be taken into account:
When you had thought to spend your CD money.
What else you own and in what areas of the market you own it.
What else you have readily available in cash.
How much and how often you get income.
How reliable the income is.
… the list quite seriously goes on and on. And this makes up the bulk of our strategy sessions with our clients…Answering the ”how” questions.
Why is this important?
This is the real question. For most of our clients, it’s not that anemic growth or inflation-induced losses mean that they’ll be poor again. But it does cut short some of the tremendous good that our game changer clients usually want to do with their wealth. It’s the endowment with a large charitable gift that they don’t establish, because, while the first and second level goals are achieved, the stretch goals have to be left for someone else to reach.
If you are like most of our clients, you’re going to be fine, and your kids and grandkids are going to be fine. It’s all those other really awesome things that you would like to do…these depend on your ability to make wise investment decisions and to challenge conventional wisdom.