Fear of market volatility can make seemingly safe investments appear alluring. The downside of playing it “safe,” however, is that you may actually be losing out by putting your money in investments that don’t keep pace with inflation. The end result for you could be a loss in purchasing power.
Let's look at an example to bring this to life. The Ford Mustang launched in 1964, and the cost of a '64 standard coupe was $2,368. At that time, $100,000 invested in a 6-month CD would have provided you with $4,300 in income—almost enough to buy two Ford Mustangs! Unfortunately, the income on the same $100,000 CD today would only provide you with enough income to pay for a car cover and a racing stripe for your cherished Ford Mustang.
The Effects of Inflation: $100,000 6-Month CD Investment
Talk to your financial advisor today about investments with the potential to outpace inflation
CDs are insured by the FDIC, offer a fixed rate of return, and are generally designed for short-term savings needs. The principal value and investment return of investment securities (including mutual funds) are subject to risk, will fluctuate with changes in market conditions, are generally considered long-term investments, and are not suitable for all investors.
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The so-called safety of CDs could actually introduce far more risk than you anticipate, especially if your CDs automatically roll over. |
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Core Fixed Income and the Pursuit of Alpha
A changing fixed-income landscape may call for a specialized approach to core fixed income as managers seek alpha, the excess return over benchmarks. |
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Julie L. Genjac We’ve all attended a meeting that when it was finally over, you thought to yourself, “what a waste of time–this could have been an email.” |
1 Data Sources: Federal Reserve, BankRate.com, and Hartford Funds, 4/19
2 Source: cjponyparts.com, retrieved 3/19
3 Source: ford.com, retrieved 5/19
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