Convinced High Yield Savings Are Best For You? Think Again. | Sage Casaga
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Convinced High Yield Savings Are Best For You? Think Again.?
By: Sage Casaga
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In March of 2022, the Federal Reserve made its first interest rate increase since 2018. Simultaneously, as rates increased, the stock market plummeted. This dichotomy caused many investors (likely the ones not working with a Financial Advisor) to sell their stocks and move their money to cash or other interest-bearing accounts such as CDs, Money Markets, Treasuries, and High Yield Savings. While there certainly is a place for these assets, historically they have not been the best place to allocate your money for the long term. I know exactly what you’re thinking, “But I’m getting close to 5% annualized returns! I haven’t been able to earn that much in a ‘risk-free asset’ in over a decade.” This statement is very true, but let’s take a step back to explain what’s really been going on in the market.?
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The Federal Reserve (Fed) raised rates for the purpose of slowing down the economy, attempting to lower inflation from a high of 9.1% (in June of 2022) to a target of 2% (last inflation reading- CPI increased 3.3% over the last year). Now that inflation has started to come down, the Fed can lower interest rates if needed. Two things tend to happen when interest rates are lowered: 1) Stocks and bonds can appreciate, likely prior to the Fed even announcing a lowering of interest rates; 2) High Yield Savings & Money Market rates adjust with the downward rate trend, and can be lowered monthly. So, was ~5% a “good” rate of return when inflation was running at the 2023 average of 4.1%? Well, inflation-adjusted, that return isn’t anything special. Also, don’t forget that the interest you receive is taxable. Since June of 2022, the S&P 500 has roared back to all-time highs, appreciating over 30%. If you’ve stayed the course, you’ve been handsomely rewarded for your patience.
So, is a high yield savings still right for you? The short answer is it depends on your financial situation. We can help you structure your investments, to make sure it fits well within your goals, time horizon, and risk tolerance. Understanding how your investments integrate within your comprehensive financial plan, is key for achieving financial freedom.?
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Now that was some Sage Advice!
?Sources: The Street
Gerber Kawasaki Wealth & Investment Management is an investment advisor located in California. Gerber Kawasaki Wealth & Investment Management is registered with the Securities and Exchange Commission (SEC). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Gerber Kawasaki only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Gerber Kawasaki Wealth & Investment Management 's current written disclosure brochure filed with the SEC which discusses, among other things, Gerber Kawasaki Wealth & Investment Management's business practices, services and fees, is available through the SEC's website at: https://www.adviserinfo.sec.gov .?
Sage Casaga is a Financial Advisor of Santa Monica, California-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately ~$2.3B billion in assets under management as of 09/30/23. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Readers shouldn't buy any investment without doing their research to determine if the investments are suitable for their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results."?