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Your Pot Of Cash Has A Hole In It.

You, like many Americans, may have a sizeable pot of cash just sitting in a bank account earning next to nothing.

The goal in keeping cash in a bank account is safety.

But what if I were to tell you that you that there was a hole in your pot and you are losing 2-3% each year and not even realizing it? You might think twice about keeping high levels of cash in the account.

In a sense, that’s what is happening. Every year, the cost of goods and services increases by 2-3% but the cash stays the same. This cash in your pot has ability to buy a little bit less than it did the year before and the year before that. This is the conception of inflation.

$50,000 today will buy more than $50,000 5-10 years from now.

One option to get around this harsh reality is to invest excess cash in a balanced diversified portfolio.

What Cheap Oil Means For The Shale Boom

Shale oil production is more expensive than traditional oil production – It costs more to get shale oil out of the ground. So when the price for oil drops, like it has, it hurts shale oil production a whole lot more than with other production methods. Bloomberg estimates that the price of oil needs to be over $80 a barrel for US drillers to make any profit. Oil is hovering right around that figure now.

For more reading:

Bloomberg’s Quick Take

Oil at $80 a Barrel Muffles Forecast for US Shale Boom

You Can’t Predict the Next Black Swan Event

What’s wrong with this chart?

Give up? The folks that created the chart are trying to predict the next Black Swan – the next significant event that could derail the economy. The problem is, that by definition, black swan events are unpredictable and exceptionally rare. Much of what’s listed here has been dissected and extensively analyzed. They are serious concerns but may already be baked into the current price of the markets. Just look at how the S&P 500 has responded due to the tensions in Russia and Ukraine

Sometimes the biggest risks are the ones that do not appear on anyone’s Black Swan chart!

What’s the best investment?

In a recent Gallup poll, Americans were asked what they thoughts was the best investment to make over the long term. Their choices:

Real estate
Gold
Stocks
Savings Accounts
Bonds

The average American incorrectly believes that Real Estate is the best investment over the long term.

The following article presents a good argument for why Stocks may be the best investment over the long term. And I’m glad that they made note that investors should be shifting to lower risk assets the closer they get to retiring.

Less Than a Quarter of Americans Get the Most Important Investment Right

Now May Be The Best Time To Check Your Risk Tolerance

Is this the top of the market? If so, are you (and your investments) ready for the possible roller coaster that could follow?

That’s the gist of a recent WSJ article, and it’s not bad advice to consider.

Investor’s appetite for risk is constantly changing.  When the market is bullish (like it is right now) investors want to maximize their returns and are willing to take on more risk.  Yet, as soon as the market turns sour, investors want to limit their risk and move to something “safer”.

That knee-jerk reaction can often end up hurting the investor in the long run. They end up buy and selling at the wrong time.

It’s better to take time now for investors to imagine how they would feel if there was a 5% or 10% drop in the market.  Would they stay calm and stay the course or would they be looking to move to more conservative investments?

If you haven’t thought about that, take some time now to consider what you would do.

Of course, we can help guide you.