{"id":28106,"date":"2012-03-09T11:03:47","date_gmt":"2012-03-09T16:03:47","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2012\/03\/09\/throwing-your-money-away-why-the-safest-investments-are-the-riskiest\/"},"modified":"2012-03-09T11:03:47","modified_gmt":"2012-03-09T16:03:47","slug":"throwing-your-money-away-why-the-safest-investments-are-the-riskiest","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2012\/03\/09\/throwing-your-money-away-why-the-safest-investments-are-the-riskiest\/","title":{"rendered":"Throwing Your Money Away: Why the Safest Investments Are the Riskiest"},"content":{"rendered":"<div align=\"left\"><script type=\"text\/javascript\">\ntweetmeme_style = 'compact';\n<\/script><br \/>\n<script type=\"text\/javascript\" src=\"http:\/\/tweetmeme.com\/i\/scripts\/button.js\"><\/script>\n<\/div>\n<div><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-27997\" title=\"Throwing Your Money Away: Why the Safest Investments Are the Riskiest\" src=\"http:\/\/www.investmentu.com\/wp-content\/uploads\/2012\/03\/safe-investments.jpg\" alt=\"Throwing Your Money Away: Why the Safest Investments Are the Riskiest\" width=\"220\" height=\"220\" \/><\/p>\n<p>An obsession with safety will actually cause you to lose purchasing power.<\/p>\n<\/div>\n<p>Back in May of 2009, Bill Gross &#8211; Founder and Co-Chief Investment Officer of Pimco &#8211; forecast a \u201cnew normal\u201d in the investment landscape characterized by slower growth in the developed economies, higher unemployment and orderly deleveraging. And many in the field took heed of these words.<\/p>\n<p>Gross wrote in his investment outlook this past January that the new normal was evolving into a world of credit and zero-bound interest-rate risk.<\/p>\n<p>Here\u2019s what did happen:<\/p>\n<ul>\n<li>Most developed economies have not deleveraged over the last four years.<\/li>\n<li>Credit is still resilient because of Ben Bernanke\u2019s belief in use of quantitative easing.<\/li>\n<\/ul>\n<p>Gross went on to say that the Fed\u2019s monetary policy may lead to the unraveling of financial markets if policy makers are unable to foster growth and inflation accelerates.<\/p>\n<p>Until the future outlook becomes less murky, Pimco is advising investors to consider ways to hedge their bets, including U.S. Treasuries, long-term inflation-indexed U.S. debt, high-quality corporate debt, senior bank debt and municipal securities.<\/p>\n<h2><strong>But Now There\u2019s a \u201cNew World\u201d<\/strong><\/h2>\n<p>Now enter Larry Fink\u2026 No big deal, he\u2019s just the Chief Executive Officer of the world\u2019s largest asset management firm, worth about $3.5 trillion.<\/p>\n<p>And he recently said savers need to become more aggressive investors as returns on bank accounts and Treasuries shrink and people grow older.<\/p>\n<p>The traditional mix of putting 60% of assets in stocks and 40% in bonds is inadequate in a \u201cnew world\u201d because of an <a title=\"The Global Aging Crisis: A Threat to Stock Market Prices?\" href=\"http:\/\/www.investmentu.com\/2012\/March\/stock-market-prices.html\">aging population<\/a>, a reduction in borrowing and risk-taking by individuals and governments, and the greater role of emerging economies.<\/p>\n<p>\u201cI\u2019ve personally said many times I would be 100% in equities,\u201d Fink, 59, said in a speech today to the Council on Foreign Relations in New York. \u201cMost investors need a more-diversified portfolio, but virtually every investor has to find ways to achieve a better return than they\u2019ll get in cash or government bonds for the foreseeable future.\u201d<\/p>\n<p>This is an attempt by BlackRock Inc. to assert their view of the pulse of current market and how investors should respond.<\/p>\n<h2><strong>Embracing a Bold New World<\/strong><\/h2>\n<p>More investors are coming off the sidelines and investing in the stock market, Abby Joseph Cohen told CNBC this Wednesday. And these were her reasons why:<\/p>\n<ul>\n<li>There have been better U.S. economic numbers, and it\u2019s been an upward trend.<\/li>\n<li>There is a growing sense that there\u2019s cash out there finally ready to hit the markets.<\/li>\n<li>There is the belief that many institutional investors are either coming back in or at least preparing themselves to come back into the U.S. equity market.<\/li>\n<\/ul>\n<p>She said stocks are <a title=\"Understanding Value Investing\" href=\"http:\/\/www.investmentu.com\/2012\/February\/understanding-value-investing.html\">undervalued<\/a>. Using one particular metric, she said stocks on the Standard &amp; Poor&#8217;s 500 appear to have priced in a 7% decline in corporate profits for each of the next five years.<\/p>\n<p>&#8220;That\u2019s possible but it\u2019s not likely,&#8221; she said, &#8220;but it gives you a sense of how nervous investors have been, and the sort of opportunities in equities if, in fact, the recession is over and profit growth continues.&#8221;<\/p>\n<h2><strong>Losing Purchasing Power<\/strong><\/h2>\n<p>Who\u2019s right and who\u2019s wrong? I don\u2019t think there\u2019s an entirely right answer. I think it all comes down to risk tolerance \u2013 what you\u2019re comfortable with. But the equity market, at the moment, is the only way you\u2019re going to make money.<\/p>\n<p>I will tell you this: An obsession with safety will actually cause you to <a title=\"Beat Inflation and a Down Market With Dividends\" href=\"http:\/\/www.investmentu.com\/2011\/September\/dividend-stocks-beat-inflation.html\">lose purchasing power<\/a>.<\/p>\n<p>Interest rates on savings accounts are below 0.3% and one year CDs are well below 1% on average. Rates have been pushed so low that even the 10-year Treasuries only yield 2%. In other words, if you buy a 10-year Treasury bond and hold it to maturity, you will only earn 2% per year.<\/p>\n<p><a title=\"Inflation: The Silent Earnings Killer\" href=\"http:\/\/www.investmentu.com\/2008\/August\/inflation2.html\">Inflation<\/a> was at 2.9% for this past February\u2026 Something to keep in mind.<\/p>\n<p>Good Investing,<\/p>\n<p>Jason Jenkins<\/p>\n<div>\n<a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=U-e2gSBi7PQ:zHVkFn2Lc-8:yIl2AUoC8zA\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=yIl2AUoC8zA\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=U-e2gSBi7PQ:zHVkFn2Lc-8:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=U-e2gSBi7PQ:zHVkFn2Lc-8:V_sGLiPBpWU\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=U-e2gSBi7PQ:zHVkFn2Lc-8:qj6IDK7rITs\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=qj6IDK7rITs\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=U-e2gSBi7PQ:zHVkFn2Lc-8:gIN9vFwOqvQ\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=U-e2gSBi7PQ:zHVkFn2Lc-8:gIN9vFwOqvQ\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=U-e2gSBi7PQ:zHVkFn2Lc-8:F7zBnMyn0Lo\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=U-e2gSBi7PQ:zHVkFn2Lc-8:F7zBnMyn0Lo\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/InvestmentU\/~4\/U-e2gSBi7PQ\" height=\"1\" width=\"1\" \/><\/p>\n<p>Article by <a href=\"http:\/\/www.investmentu.com\/\" target=\"_blank\">Investment U<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"<p>An obsession with safety will actually cause you to lose purchasing power. Back in May of 2009, Bill Gross &#8211; Founder and Co-Chief Investment Officer of Pimco &#8211; forecast a \u201cnew normal\u201d in the investment landscape characterized by slower growth in the developed economies, higher unemployment and orderly deleveraging. And many in the field took &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.investmacro.com\/fx\/2012\/03\/09\/throwing-your-money-away-why-the-safest-investments-are-the-riskiest\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Throwing Your Money Away: Why the Safest Investments Are the Riskiest&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-28106","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28106","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=28106"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28106\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=28106"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=28106"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=28106"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}