Cash is King? Since when? (The Motley Fool)

Headlines can be sometimes so dramatic. "Silver King is dead," announced an article written by James Maltin portfolio managers. He emphasized that, then that many used to think of cash a refuge, extremely low interest rates have broken this illusion.

But then, when cash was never a refuge?

As noted the Maltin, a pile of cash lose more of its value during the night, as a stock investment. But those greenbacks grow exactly for you, either. Pernicious and persistent inflation will be eat away at their value, as it is for any investment. Remember, often cited quotes, long-term annual return of approximately 10% factor of 3% per year as inflation usually eats.

A lack of interest
While you can grow progressively a heavy nest egg at 7% per year, a single savings account do provide you financial security. Even if you can find an account that will pay you 1% in today's difficult economic environment, a 3% inflation rate means that your purchasing power will still decrease 2% compared to the year.

Economy and interest rates of the cycle by ups and downs over the years. There are times when cash pay more, and interest rates are high. In 1981, you could buy a CD for six months with an interest rate annual topping 15%! But by most economic environments, inflation will keep corrosion your statements. This is why you must certainly more risky investments that offer biggest potential gains. If successful, carefully selected investment stocks can help your money well exceed inflation.

Role of Cash
We are not saying you must abandon greenbacks entirely. You always have a certain amount of money aside or readily available for emergencies and day-to-day expenses. And if you do not have enough cash, you may have to sell your investment long term for it. If these investments be slip at the moment wherever you sell, you could suffer significant losses - all lack of sufficient cash side.

Cash is not King now, but then again, it should never. It is simply a necessary tool in a larger financial arsenal.

Longtime contributor Selena Maranjian Fool does not own the shares of all companies mentioned in this article. Try our services free for 30 days newsletter investors. We Fools can not all hold the same views, but we believe all that taking into account a wide range of ideas we done better investor. The Motley Fool is Fools expressing some crazy.