Fidelity says this is a surprising risk of holding too much money – do you have too much?

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Cash feels like the most favorable bet for most people. It is stable, predictable and always there when you need it. But according to Fidelity studies, having too much money can quietly erode your wealth rather than protect it.

With the fall of interest rates and inflation is still crawling, the value of the money shrinks. Although there is little cash is necessary for emergencies, long-term Fidelity data shows that in historically, the worst-performing class of assets were historically, with significantly lagging behind shares and bonds even during unstable market conditions.

Think about it: I’m a financial advisor – my biggest customers do all these 3 things

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As Melanie Musson, an expert in finance with InsuranceProviders.com, explained: “Money has value, but definitely do not increase in value and will almost certainly decrease value.”

So is it as safe money as safe as it seems? Fidelity studies suggest otherwise. Let’s dive deeper to understand why.

Fidelity data makes one thing clear: the shares have historically exceeded money, even during variable markets. Their analysis shows that $ 5,000 a year investment in shares from 1980 to 2023 (even market peaks) would increase exponentially, while the same investment in money would lead to some of this return.

The long-term trend is even more striking. According to Ibbotson Associates, large capitalization reserves (think S&P 500) return 10.4% annually from 1926 to 2024, compared to 5.0% for long-term government bonds and only 3.3% for T-Bills.

Robert R. Johnson, a professor of finance at the University of Creyton, puts this in the perspective: “A dollar invested in the S&P 500 in early 1926 would rise to $ 18,112 (with all dividends reinvested) at the end of 2024. The same dollar invested in T-Bills will increase to $ 24.”

The difference is not just significant – this is the difference between building wealth and barely maintaining.

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Not on the on -board train? Bonds are your stable, no drama alternative.

As money, bonds pay interest. Unlike money, they have the potential to appreciate and lock higher yields. Whether you choose individual bonds, reciprocating mutual funds or ETF, they offer a reliable way to increase your money without a whiplash.

For those who love their money in the money market because they generate interest, bonds are a natural next step – the same concept, better potential for return.

Let’s be clear: money is not the enemy. This is essential to cover emergencies and short -term costs. But keeping too much of this can cost you the opportunity to increase your wealth.

Fidelity studies show that while some money is needed, long -term growth comes from investing in shares and bonds.

“Cash should be used primarily for emergency savings. Once you have at least three -month costs (or 12 months for a conservative approach), excess money becomes resistance to wealth. “Justin High, a certified financial planner (CFP) and the president and co -founder of Haywood Wealth Management.” Money outside of short -term needs should work for you through investments such as shares, ETF and mutual funds. “

The export? Save enough money for emergencies, but start investing after you have found your financial pillow. If your wealth does not grow, it loses value.

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This article originally appeared on Gobankingrates.com: Fidelity says this is a surprising risk of holding too much money – do you have too much?

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