How much are you losing every month and how to stop it?

[Eric Fernwood]

Many people are waiting on the sideline, letting their capital ride where it is. The consequences of this inaction depend on where the money is parked. One of the big factors is inflation.

What is the impact if you leave $1M in cash? At 8% inflation, you will lose: $1,000,000 x 8% = $80,000/Yr. or $6,667/Mo. in buying power.

If it is in stocks, YoY the market is down 21%. Your equity decreased by more than $200k, plus you lost $80,000 due to inflation.

CD or Treasury Bills? The best they can do is 4%; you’d lose $1,000,000 x (8% - 4%) = $40,000 when you see your cash again in a year. Then you will have to look for options again.

What if you buy a good property in a good location (such as Las Vegas) for $400,000? You’d have a long-term income stream that increases faster than inflation and appreciates faster than inflation. Below is a simplistic worksheet.

Over a 5-year hold period, IRR is 15%.

Does anybody see a better option to deploy cash in today’s environment?