Cypress Wealth Services
April 2023
It’s likely that when you were young, you were taught the importance of keeping your money in a savings account. This lesson is undoubtedly helpful for beginners attempting to start a healthy habit of saving money. However, if you aspire to increase your wealth, allowing your money to remain idle in savings is not always the best way to grow your portfolio.
If you wish to see ample returns on your savings, it’s imperative to make the most of its potential by putting it to work for you. Read the following tips from our team to understand how to optimize your overall wealth and financial strategy.
Idle cash can build up in a variety of ways. Young professionals earning more money than they are used to can let cash pile up in their savings because they don’t know how to make it work for them. Experienced investors may not even realize they have idle cash sitting around from dividend payouts that aren’t automatically reinvested. Cash from passive revenue streams, such as rental properties, may not be integrated into your investment portfolio and could be actively dragging down your return potential.
Regardless of where the cash is coming from, having too much of it idle in your portfolio is not a wise financial strategy. There is no right number and it is different for every person and family, but we believe one should have a cash contingency target to keep in reserves based on your unique circumstance. Other than this backup cash, the amount of idle money in your portfolio should be limited, with additional funds being productively put to work.
Do you know how much idle cash you’re carrying? You may consider the money you put into mutual funds as being invested, but did you know that these funds usually keep about 5% of the portfolio in cash and cash equivalents? Evaluate your portfolio as soon as possible, because the excess cash sitting in your savings is losing the fight against inflation.
Inflation has increased costs, and the value and purchasing power of $100 today is very different from that of 30 years ago. Even with rising interest rates, idle cash is still not earning nearly enough to effectively combat inflation and holding on to excess cash for the long term is effectively minimizing the potential upside of your hard work. What can you do with the extra cash? How do you reinvest it so you maximize its return?
At Cypress Wealth Services, we strive to find the best way to put your money to work and align your investments with your current needs and future goals. Whether you’re saving for your child’s education, strengthening your retirement accounts, or planning to purchase a new home, we want to see your investments reach their potential.
It’s important to understand there are more efficient ways to handle cash than simply stockpiling it in a checking or savings account. If you need liquidity but still want to put your cash to work, consider investing in short-term securities. These types of investments can be liquidated in less than a year but earn better returns than money collecting dust in your savings account.
Municipal bonds, real estate, and savings bonds are all excellent long-term investment options if you’re in a position to limit access to your funds for an extended period of time. These types of investments require commitment but can be lucrative if held until maturity.
If you find that your portfolio has an excessive amount of cash, we are here to help you make the most of your money. Our team can demonstrate the potential returns that you might miss out on by holding on to cash for an extended period of time. Additionally, we can analyze your portfolio allocations to help you identify the most suitable investment strategy in order to optimize gains from your cash. Reach out to schedule a consultation today by calling us at 866.888.6563 or contact one of our offices.
Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high-net-worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services serves a broad range of client needs using their experience and expertise to act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring the wealth and legacy a person has already built to their loved ones. With financial advisors in Palm Desert, CA, Tustin, CA, Athens, GA, and Anchorage, AK, the firm serves clients across the country with Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit www.CypressWS.com or call 760.834.7250.
