Cash Hasn’t Always Been Trash

Hard to believe, but years ago the returns on cash were more than decent.

Throughout the 34-year time span from 1948-1981, a period of gradually increasing interest rates, returns on cash trended upward, explains finance professor Craig L. Israelsen in the December 2012 edition of Financial Planning magazine.

Observes Israelsen, “the heyday of cash was in 1981, with a one-year return of 15.58%.”

That’s hard to believe given the current state of affairs.

Rates started their long descent downwards in 1982, with falling rates ushering in a thirty-year bull market for bonds. Last year, in 2011, the one-year return on cash reached a low point of 0.05%.

Of course, once taxes and inflation are taken into account, the return on cash today is negative, meaning you lose purchasing power when you hold cash. That might be enough to make you look back fondly on the Carter years (well, maybe not).

 

About Mari Adam

Mari Adam, Certified Financial Planner™ and President of Adam Financial Associates Inc, has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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