In these uncertain times, investors are faced with an important decision: whether to stay invested in the markets and bear the brunt of the tough economic climate or switch to cash?
1. Equities beat inflation over time. Cash diminishes an investor’s purchasing power once taxes and inflation are accounted for. After subtracting the inflation rate from what looks like an attractive interest rate offered on a cash account, the investor may be left with only a small return of 1 or 2 percent. Although returns on the JSE only just outpaced inflation over the past five years, when you look over a longer period, the returns are a lot higher. Equities have repeatedly outpaced cash over longer periods.